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

To: Bobby Yellin who wrote (17114)	9/1/1998 1:07:00 PM
From: Ray Hughes	Read Replies (3) \| Respond to of 117011

Hi Bobby, Re: gold, Nikkei & Japanese economy. Decades of analysis has shown me that there are many inter-connected relationships between a commodity and geo-politics, world economies and societal concerns. Connections of gold to Nikkei and Japanese economy, just to name a few: 1) as a tradeable commodity gold will be bought by Japanese when its Yen price is in a rising trend. Because gold is priced in USD the preceeding means gold is bought when USD rises relative to yen and gold price does not drop so rapidly as to offset USD/Yen. The latter ratio will favor gold if Kikkei is declining because Japanese economy is declining. In short, gold becomes one of many currency hedges for the man in the street. However, for the pro trader USD, pure and simple, is the play. I suspect US is telling Japan that, given Russian collapse and end of cold war, US is no longer willing to overlook Japan's intransigence on trade. US no longer is so anxious about having a strong Asian barrier to communism. Hence, US may be telling Japan to open markets or US will just let Japanese economy go down the gurgle. If so, Japanese wealth generating machine just ground to a halt. End of guaranteed employment, globe-trotting touring, etc. US may tell Japan that Asia must fix its own economy. This means things like Japan can't buy Australia just to house Japan's elderly. Hence, with Australia going down the gurgle, absent big Japanese buying of land, its currency crashed. Now Canada's turn with Japanese not buying up all the timber, minerals and fish Canada can produce. The absurd levels Japanese wealth reached is illustrated for me by commonly seeing tanks of live shrimp being flown, salt water and all, to Japan. I understand Japanese pay about US$100 per pound for live shrimp for sushi. The cost of freighting the salt water has to be half of that because the fishermen are getting less than US$7/lb for the shrimp. Re: deflation. Hey, its here. Raw material costs have been declining for about a year (metals, timber, petroleum, paper prices down big time). There are normally lags of months to a year, or so, before the reduction in raw costs is passed along to users. In the meanwhile wholesalers and manufacturers try to fatten their margins as costs drop. Finally, the deflation starts hitting jobs in the raw materials sector, economic activity slows and manufacturers, wholesalers and retailers try to stimulate lagging sales by cutting prices. Here in Vancouver gasoline prices declined 20% in one week due to competitive pricing from a US petroleum company. Deflation is here!!! Government is not anti-people, its just pro-banks and business that can put a dollar of campaign funds in the pols' pockets. Understand that and you have the key to the world. US Fed thought US employment was getting too full and too many labor actions were getting the Fed's attention. Is it just a coincidence that the Fed voted at last Open Market Committee meeting to lean toward raising interest rates?? No. Is it any coincidence that the stock markets have taken a hit? No. Cause and effect! This is exactly what hit the markets in October 1987 - the threat of rising interest rates. The banking system doesn't like inflation that erodes their purchasing power. Please notice that banks are the largest real estate owners in the world. Can't have borrowers paying back in inflated dollars that purchase less real estate. Will the market bounce back to a major bull phase like after '87? Maybe not. This time consumers were in the market and, therefore are losing purchasing power. This correction may cause "negative wealth effect" that deters consumption leading to a recession and corporate earnings decline that causes the market to drop, etc. that yields a negative feedback loop that could pull market lower. RH