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Gold/Mining/Energy : At a bottom now for gold? -- Ignore unavailable to you. Want to Upgrade?

To: Vieserre who wrote (1301)	6/26/1998 9:48:00 AM
From: Amelia Carhartt	Respond to of 1911

"In the face of a hopeless Administration, Federal Reserve Chairman, Alan Greenspan must take the initiative. The Fed must ease until the price of gold, the best real time indicator of monetary temperatures reaches $325. This would not be inflationary: rather, it would avoid deflation." Steve Forbes, Forbes Magazine July 6, 1998

To: Vieserre who wrote (1301)	6/26/1998 1:49:00 PM
From: Ray Hughes	Read Replies (3) \| Respond to of 1911

Vieserre All hinges on gold being perceived as money. Money must perform many functions, some of which gold does not perform well in todays swollen financial markets. Credits, which can be transferred by wire, perform, vastly better, the function of transferring ownership of wealth. One could transfer a voucher for ownership of gold held in trust - that's just credit. I laughed at people telling me they had stores of gold in Swiss banks with which to protect themselves against violent upheaval in US cities. How would they get possession of the gold if there were violent upheaval? A non-sequitor? Forget gold as a medium of exchange - credit in a safe bank is fine for business, governments and the populace. Ha! Assumption that banks are safe. OK. Hold for a general failure of the banking system. How much? Where? How safe? Vault in your basement full of small coin? Has gold performed well over a few decades' span at protecting us against general inflation? !967 Chevy priced at about$3,000. Gold at about $90? 1997 Chevy $15,000. Gold at $300. Chevy up 5 fold, Gold up 3+ times. Sorry, even a nicely restored Chevy has kept your assets whole better than gold. 'Course, we've always got a problem picking end points so serious analysis would employ linear regressions on price trends. The old saw about an oz. Au buying a good suit also has failed - suite $750 equals 2 oz. Au. today. Re: credible evidence. Treasury of RSA, which markets all SA gold, did advertise to stop bear raid on gold. This was during the "last great rally." Sales by Bank of Commerce - Jidah appeared timed with US Treasury auctions. RSA ads stated this appeared to be a concerted action intended to drive down the price of gold. Re: Attempt to control a relatively stable market. I suggest that it is CB control that has caused gold to remain relatively stable in the face of collapse of Russia and related treat to eastern European stability, and collapse of Asian currencies. Why was there not a vast rise in gold due to this disturbance? Actual statistical studies show there never has been a statistically reliable corelation between political/social unrest and gold price. Conclusion: gold has numerous associated myths. Gold is doing exactly what it should do under current interest rate conditions. Gold moves inversely to "real" rate of interest on long bonds. That's the only statistically valid corelation. Until real rates move negative the POG languishes. Then, negative real rates must trigger public buying of gold so massive as to overwhelm any attempts by authorities to stabilize it. CBs know that gold stands in the wings to discipline them. I think this is understood today and is why inflation, even a little bit that might be "good for business" will not be tolerated. CBs have spent a decade restoring their credibility - they won't let it go without a fight. Read Greenspan's works. Gold has done as he said it must do to make currencies "as good as gold." Until Greenspan is gone don't bet against the US Fed - they've probable got more money to fight with. Re: silver. Here, perhaps is the "proof of the pudding." Silver was money and is still widely used in India to accumulate and display wealth. So, if we can forget that silver is money, then clinging to gold as money is a contradiction. Me belief is that each remains money, but only in the backwaters of the economic world. Silver has some traits that make it better money. Occurring in veins, its harder to prove up a deposit. Silver deposits generally don't have as much Net Present Value as do most gold deposits, so exploration and development don't get as well funded by the market. Therefore, the potential to increase mine supply of silver is relatively more limited and that makes for a better "money." Importantly, CBs don't hold much silver with which to supply the deficit. Finally, size doesn't count. Price/profit potential does. I do think that the days of "go-go" banking are drawing to a close. There are vast parallels with the '29 situation of over-extension of credit on ephemeral assets. I know, personally, how eager Fund Managers were to buy placements in resource companies having valueless assets. I suspect that's only the tip of the iceberg and that much wealth has already been transferred through the market mechanism. Many investors are at risk of becoming losers, and as they begin to experience a negative wealth effect, will pull back on consumption - the winners (remember, in the short run equities are a zero-sum game so there are some winners) will have socked away their gains. Here in Vancouver Bre-X bought many mansions and yachts. So what if they are priced a little lower today? The result would be a general slowing of economic activity as the money created by the bubble of credit consolidates into fewer hands that spend less on daily needs. Hence, I believe the velocity of money will/is slowing. This implies deflation, not inflation, and, other things being equal, a diminishing of real rates when CBs attempt to moderate the deflation. That set of assumptions portents a stable-to-lower POG followed by a stable-to-rising (slight) in POG. However, no big rally absent a return to strongly negative real rates. Could this already be playing out in the strong utilities shares as smart money bets on deflation? RH PS. WB appears to have been vastly more successful (monetarily) than your guys so I'll bet on my "smart guy" and he's in silver.