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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Oak Tree who wrote (16904)	8/29/1998 12:53:00 PM
From: Sergio R. Mejia	Read Replies (1) \| Respond to of 116816

"...financial system cannot withstand a concerted rise in the price of Gold..... how long can it be kept that way?" From the Privateer: August 28 Commentary The collateral value has crashed, the debt remains, and the effects are spreading to engulf the world. In fact, the only two "oases" of comparative financial calm which still exist in the world are the U.S. itself and that part of Europe which is scheduled to be knit together within the European Union at the beginning of next year. (Posted here on August 14) In the two weeks since that was written, the "glitch in the road" which began with a small South-East Asian nation (Thailand) floating its currency (the Baht) in July 1997 has literally engulfed the world. The latest casualties are the stock markets of the two biggest economic nations on earth - the Dow and the Nikkei. In the U.S., the bull market is dead. In Japan, most banks and insurance companies are looking at losses on the core capital represented by their stock holdings. And, of course, there has been another "casualty" of the inexorable sweep of this financial crisis. Gold. In $US terms, Gold has fallen with each surge of the crisis. Now that the crisis is truly global, and threatening to escape totally from the control of mortal man (even the IMF can't stop it), Gold has been hit again. At its spot close of $US 274.50, Gold is back to levels last seen in June 1979. It has taken out its January 1998 lows. It is falling even in the face of a falling U.S. Dollar. It has spent two whole days below the $US 280 level, at which it was rumoured that the Bank for International Settlements (BIS) would buy it off the floor. Gold is, literally, caught up in a paper maelstrom. People are selling stocks to buy bonds, or meet margin calls, or service debt, or simply get literal cash. In Russia, there are classic and literal bank runs with people desperate to get their savings out in cash, so they can either spend them or convert them into something (anything) else. In Hong Kong, the local government is well on the way to nationalising the whole island as they hold up the stock market by main force, utilizing billions of dollars of reserves in the process. All of Asia is now officially (or unofficially) in deep recession. The story is the same all over the world. Even in the U.S. and Europe, where stock markets were setting daily records six weeks ago, and where bond yields are at lows not seen for 65 years, the pressure is growing. Everyone, everywhere is looking for "safety". For more than 2,500 years, precious metals have provided ultimate safety. But, for those same 2,500 years, Gold has been intimately and OFFICIALLY intertwined with the financial systems of nations. The cardinal difference today is that Gold is NOT so intertwined. Gold has NO official connection with money (remember, there is no Euro - yet). "The global paper currency system is very young. It depends for its continued functioning on the belief that the debt upon which it is based will, someday, be repaid. The one thing, above all others, that could shake that faith, and therefore the foundations of the modern financial system itself, is a rise (especially a sharp rise) in the U.S. Dollar price of Gold." You may recognize this quote as a direct "lift" from the introduction at the top of this page. It was written when The Privateer's Gold Pages were first posted on the web, at the beginning of 1996. At that time, Gold was $US 414. Now, it is $US 274. On a longer-term basis, the Gold chart has not yet broken down. But on a tactical or short term basis, it has. There is only one certainty here. The global financial system cannot withstand a concerted rise in the price of Gold. As long as people keep circulating within the system, the system continues to function. But as soon as they step outside the system - with physical Gold purchases - the system is in deadly danger. Right now, Gold presents no alternative. The question is, how long can it be kept that way? That's one of the questions that we will be examining in the next issue of The Privateer - out tomorrow.