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

To: Ken Benes who wrote (33477)	5/8/1999 11:24:00 AM
From: Ken Benes	Respond to of 116762

This past week, there was editorial in the NY Times stating that golds role as a financial instrument were over. Reflecting on the occurrences of these past years says quite the opposite. Golds role as a stable store of value was instrumental in preventing a global meltdown that would have rivaled the collapse of the 1920's. Gold was not the sole instrument of support, the US economy and the effective manipulation of interest rates played and even larger role, however, the liquidity provided by the gold carry trade provided much needed funds that were used to support the wavering markets. In light of golds role,it is ironic that so much has been written as of late painting gold as an anacronism that should be discarded. Well it won't and cannot be abandoned while the complexities of the carry trade have wide ranging implications for the market. When this situation is resolved and the leased/short positions are covered, the Western central banks will have parted with a substantial portion of their gold. This gold will not have gone to gold heaven, it will be available as a store of wealth for future generations. The bigger questions who will own the gold. Obviously, not the westerm central banks. Their is good anecdotal evidence suggesting the Asian nations are accumulating much of the gold liquidated by the West. It is ironic, Asia reeled, the West comes to the rescue, helped by the liquidation of their gold reserves. Finally, Asia recovers owning much of the wealth liquidated by the West. Coincidental to this process, the West has incrued some rather large emotional debts with the East that will be dealt with in the future. Maybe our central banks have been too smart for their own good. Ken

To: Ken Benes who wrote (33477)	5/8/1999 7:10:00 PM
From: Bob Dobbs	Read Replies (1) \| Respond to of 116762

Ken: Your statements of the growing importance of gold in our world financial picture (replies 33479 and 33480) are on the mark. If we are to believe the multiplier effect of these gold carry trade loans at 100x then 8,000 uncovered gold tons funds an astronomical $7.5 TRILLION in paper around the world! Compare that with an estimate of the world's wealth ($100-200 Trillion). I don't think the multiplier figure is quite that high, but it may very well be ballpark. The central banks are fighting a losing battle with market forces which will eventually overwhelm them, as during the London Gold Pool of the 60's and US Treasury Auctions of the 70's. Those invested in the gold markets must have a long-term horizon, because the central banks have a large hoard and good staying power. They began with 35,000 tons and are now down some 8-10,000 tons, leaving today as little as 25,000, barely 1/5th of the world's total. The shorts must cover at some point, at which time there will be a rocket rally the likes of which the world has yet to see. The US gold stash may eventually enter the fray, depending on perceptions of vulnerability in financial markets and the willingness of Congress to allow it. If that does happen we can be nearly certain the last major player has capitulated and the end is near for large-scale tinkering... Bob