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To: Shelia Jones who wrote (3983)	10/9/1998 12:52:00 AM
From: 007	Read Replies (1) \| Respond to of 14427

Hi Shelia, this is from the Kaplan page on gold stocks. Here's a segment where he talks about the short and long yields. This site is very informative and is updated everyday at 5:30PM. I hope this helps. Looking forward to Luc's comments. OO7 goldminingoutlook.com WORLDWIDE INTEREST RATE POLICY: Gold must always compete with time deposits as a short-term investment. Therefore, as interest rates rise, there is more to lose by being invested in the yellow metal rather than in an interest-bearing instrument. As interest rates fall, there is less to be sacrificed by being invested in gold. The recent economic and political volatility, especially in parts of the third world, will make it much more difficult for the Fed to raise short-term interest rates regardless of a moderate acceleration in domestic inflation. Because the world's economic problems have found their way to the U.S., the Fed is likely to continue to lower interest rates, especially after each 10% drop in the Dow, in spite of the purportedly strong U.S. economy and year-over-year wage gains currently 4.0 percent in hourly terms, the highest wage inflation since 1983, coupled with a tight labor market. Worldwide concern about high unemployment is rising rapidly, while inflation vigilance is being increasingly perceived as less important or even irrelevant. Evidence of this can be seen in the recent elections in Germany in which the incumbent was defeated primarily due to his wish to maintain the status quo, while his oppponent more vocally spoke in favor of explicitly lowering unemployment. A trend toward permitting inflation in order to prevent a more serious recession will lead decisively toward higher gold prices. One key item to watch is the relative direction of short-term versus long-term interest rates in the U.S. If short-term rates are raised by the Federal Reserve, while long-term rates stabilize, this would be bearish for gold as short-term time deposits would become a more compelling investment, while inflation fears would be minimized due to steady long rates. On the other hand, if the Fed lowers short-term rates, while long-term rates rise, this would show that inflation is a concern of market participants in the face of an Fed more concerned about heading off a recession than in fighting inflation, which would cause gold prices to rise sharply. Notice that the U.S. Federal Reserve has done very little in many months, making a single quarter-point lowering of the federal funds rate while leaving the discount rate unchanged. Recently, U.S. short-term market rates have fallen as long-term rates have sunk to new historic low levels and the yield spread of corporates over Treasuries has widened considerably. We could be headed for a period of moderately increasing inflation coupled with a financial recession, also known as stagflation, the ideal combination for a gold rally. On Wednesday, September 9, 1998, Japan cut its overnight call rate by 0.25% from 0.50% to 0.25%. One could safely predict that there will not be more than one additional quarter-percent cut! On Tuesday, September 29, 1998, the U.S. Federal Reserve lowered the federal funds rate by 0.25% from 5.50% to 5.25%, while leaving the discount rate unchanged at 5.00%. On Tuesday, September 29, 1998, Canada lowered its bank rate by 0.25% from 6.00% to 5.75%. On Tuesday, October 6, 1998, the Bank of Spain lowered its repo rate by 0.50% from 4.25% to 3.75%. On Thursday, October 8, 1998, the Bank of England cut its repo rate by 0.25% from 7.50% to 7.25%. Due to more frequent worldwide interest rate cuts in recent weeks, this indicator has been raised to MODESTLY BULLISH.