July 6, 2022 

Gold Enters Major Bull Market


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 By bluejay

02/02/2004  9:46PM


There is an eye opening article concerning technical thoughts relating to gold, the Dollar and some of the other component currencies of the Dollar Index that was recently published on the http://www.jsmineset.com website. The article is dated Monday, February 02, 2004, 11:07:00 PM EST.
 By bluejay

02/01/2004  10:58PM


Today, the constant for tracking gold's price movements is related to the U.S. Dollar. Everyone is most familiar with the posted Dollar activity of the day which is actually the price on the U.S. Dollar Index.

The Dollar Index is traded on the New York Board of Trade in NYC and is composed of six currencies:

Euro 57.6%
Yen 13.6%
UK POUND 11.9%
Canadian Dollar 9.1%
Swedish Krona 4.2%
Swiss Franc 3.6%

The main reason for the Dollar's weakness and Gold's strength in U.S. funds is attributed to the current administration's expanding red ink. The administration's current account debt and government debt is more than twice the amount of the Clinton years and continues to grow.

Our Current Account deficit with our trading partners is approximately $140 billion. During the administrations of Kennedy, Johnson, Nixon, and Ford the U.S. showed a slight credit balance over those years.

The problem with the Dollar is that U.S. economic recoveries are becoming more and more dependent upon a higher and higher amount of debt coupled with lower and lower interest rates. Until this trend is reversed, if possible, gold's performance will be tied in U.S. currency to the trading action of the Dollar.

The Japanese Yen is on the verge of moving up against the Dollar. When this happens, expect the Euro to reassert itself with new highs. Directly following the price of gold will advance again as the Dollar Index sells off to record lower lows.
 By Rick

01/31/2004  7:33PM


Ususally I write from a perspective of politics, but this time, please help give me some perspective:

What parameter is the price of gold (here in the current political and/or global and/or US national climate) tied to the most, and therefore having the most immediate influence on volatility, be it both long-term and short-term:

1) Fluxuations from the recent ebb and flow of the US dollar;

2) Global economic instability, measured by the prospective survival and viability of EU;

3) Politics in the US today (presidential race pontifications);

or 4) Something I haven't thought about.

I value your insight, and enjoy your contributions. I know to even answer this is a tall order, and certainly not meant as a challenge. Basically, "Whaddaya think?"
 By bluejay

01/31/2004  2:28PM

Currently gold is trading in an inversed locked step with the U.S. Dollar. Gold weakened last week as a result of a slight upwards move in the Dollar that was orchestrated by the Federal Reserve Open Market Committee.

The Committee indicated in its January 28th press release that its time table for keeping interest rates low was changed in their mind from "a considerable period" to "be patient." As Paul van Eeden said, "the market, on the other hand, has no patience." "The Dollar immediately strengthened against the Euro and, as a result, the U.S. Dollar gold price declined." The thought of higher interest rates sooner, rather than later, would in theory encourage some investment in the U.S. Dollar. Ay least, that's the theory.

Usually when these kinds of semi-positive short term statements concerning the Dollar are made by officials, the Exchange Stabilization Fund is in the market making these people look good for political reasons by selling the foreign currencies that have strengthened the most against the Dollar.

In the Financial Times today it was reported that the Bank of Japan spent $67 billion this January to keep the Dollar higher against the Yen. A total of $187 billion was spent by them for all of last year for this purpose. Japan can not continue spending at this monthly rate. Somewhere in time, sooner rather than later, the Yen will move higher against the Dollar and gold will make new yearly highs.
 By bluejay

01/19/2004  10:47PM

Last week European Central Bank President Jean-Claude Trichet released a statement that sent the Euro currency into a short term decline that influenced the Dollar higher and thus sent gold lower. This is the reason that gold sold off from about $430 to under $410 where it is now trading at close to $405 Monday evening in Hong Kong.

An explanation of this event is presented in a reprint of some of the comments from Jim Sinclair at http://www.mineset.com that was released on January 17, 2004.

The Cooperation of the Incumbents

Do governments really worry about how they handle national assets when that ability depends upon an upcoming election? Would China cooperate with Japan and Washington if it meant the acceptance of and a modest rather than a major readjustment in the Yuan? Is the following a real reversal of a trend or an act of mutual support?

Credit Where Credit is Due

Markets have been central to my life for the past 45 years and I must credit the administrations of all major trading nations with the magnificence of their operations up until now. The cooperation of media, government, reporting agencies, law enforcement and others have created a major bull phase and recently a major currency adjustment in the form of a brutal move up and then down in the Euro.

What European Central Bank President Jean-Claude Trichet condemns, he created along with his colleagues and the market only followed the verbal statements of his fellow central bankers. First, it was on the up side with the public declaration that there was no problem with the higher Euro, and last week it was on the down side with statements concerning the evil of a high Euro.

The US Treasury market is a miracle of international central bank cooperation, using technical maneuvers to bull the market by nailing a huge short position after applying force to the short end of the curve. All this is effective but only on the medium term at best.

Last week's event may end the easy money for a while in gold on the long side but will not contain its price for any significant time period.


We are trading right into the support at Friday's close.

The major support for gold is right below and right above $400. Major long term support for gold is just slightly below and above $390.

Resistance still stands again at $419.70 and $430.30.


The important point here is that while other governments continue to play their games of support with the US concerning currency values and their exporting leverage, the main thesis of the US is to get gold lower which will thus create a false sense of security to hold its Dollars.

For the security of your future, it is strongly suggested that this current period in gold's weakness be used as an opportunity to make first time investments in bullion gold coins or to add to already existing positions.

Correction from the previous entry:

Total manufacturing jobs lost in the US since 2000 is 2,600,000. It was erroneously forecast to be 2,400,000 at election time.
 By bluejay

01/17/2004  2:44AM


I just read your past comment concerning that there may not have been a conspiracy in gold after all since the price is above $410.

Even though the general conspiracy by the central banks of the world's debtor nations may have forced them to eat crow now based upon the changes in thinking by China and the oil producing nations, our debtor country along with the others may still be capable of sporatic influence, albeit greatly reduced.

China currently holds 2% of its reserve assets in gold. It is their intention to increase this figure to 10%. China has recently made it legal for its citizens to hold gold. So you can depend upon China to be a serious buyer for years to come. The oil producing countries in the mid-east are fed up in exchanging their exported oil for a greatly reduced U. S. Dollar value. I hear that in the years ahead those oil producing countries will be slowly reducing U.S. Dollars as part of their holdings representing their currency reserve base and in addition, will be, the sooner the better, eventually not be accepting payment in Dollars at all. Oil prices were stronger this past week and are now close to $35 a barrel level. The Dollar has had a little rally lately but it will be short lived.

The old gold cartel is in shambles as a result of the continuing weak Dollar. As interest rates are kept artificially low in the U.S. the Dollar will overall continue to weaken and gold will rise. If interest rates start rising the recent artificially stimulated economic expansion will come to a screaming halt. In this election year it will a safe bet to make, that rates will continue to be pegged at the current low levels.

If rates do rise possibly following presidential elections or before, the recent renewed confidence in the U.S. economy will quickly evaporate. This possible event will surely effect an enormous amount of U.S. companies and some shareholders will probably begin bailing out which will send the stock market south. If this happens, where will their money go? It most likely will be placed in areas of security and one of those places is gold.

Another serious potential trouble area for the stock market is the derivatives market which shakes and trembles when interest rates rise. This potential if it does develop, could totally unravel the economy as we know it today and our job security will feel its wrath. The unregulated derivatives market is the biggest potential bombsell that has ever surfaced in the economic history of the World.

The conspiracy to keep gold artificially low is all but history. How much longer will the oil producing nations continue to accept the depreciating U.S. Dollars for their oil? Somewhere soon in time, the Euro will come into play as the new World reserve currency and the Dollar will slowly over the years be replaced.

This Dollar weakness is solely attributed to a country living beyond its means. During the 1800's the world economic power was England. Most of the 1900's that position was held by the U.S. The decline of the U.S. has already started. China is now taking over the driver's seat of economic power and influence. The Chinese will dominant the world in the 2000's. Get ready America. China knows that in order to make the new world rules that it must own a far greater amount of gold. This is why the conspiracy will never again hold the power that it once did when it significantly suppressed gold as it did over the past 15 or so years. Game over!

The last gasp of frustrated purpose for the old gold catel may have taken place in the 10 spread out gold sales by England below $300 an ounce a few years back. The English Exchequer took much public related heat for those sales.

One other related item. Our wealth in the U.S. compared to other countries on an international basis will consistently decline over the balance of our life times. It has already started. The reason is that the world is saturated with U.S. Dollars and our representives in Washington have no responsible prospective interest in reversing this new trend. They for the most part, are just interested in being reelected and living off the fat of the land.

A large percentage of our world debt is related directly to imported oil. Our oil reserves in this country have been in consistent decline for many years while our consumption continues to rise.

Even though we have been given temporary consumer relief in lower domestic retail prices in all goods imported from China, this is only adding to our international debit balance problem with this trading partner. Along with the problem is our continuing loss of manufacturing jobs. By the time election is here later in the year, the current administration will have compiled a disgusting record of destroying 2,400,000 American manufacturing jobs. The newspapers say we have a robust economy now. This is a false and unhealthy expansion. A healthy economic expansion is supported by the increase of manufacturing jobs, not the loss of them.

Even though the U.S. population is almost totally unaware of their shrinking overall wealth compared to the rest of the world community, the commercial traders of gold are also not aware of this larger picture change that must facilitate higher gold prices compared to declining U.S. Dollar. Their old guard seems content is believing that they still control the world gold market by their foreful manipulative selling of the metal as was shown this past week. The metal reacted too far compared to the mini advance of the Dollar. They should have learned the lesson that the British Exchequer experienced and not continued their obssession with control issues relating to the gold market.

Jason, Good news for you. It is my opinion that Palladium has finally turned the corner and will be higher into the years ahead. Good Luck! Stephen

I am getting like Richard Russell. I wake up in the middle of the night and start doing this and that and end up writing. Well, I guess it's back to bed.
 By John Q Public

12/17/2003  10:34PM

You make a good point?

How about compliance issues as one thing! The Sixteen is no where close too SEC Compliance.

No Audited 2002 Returns, no quarterly filings for any of 2003 and of course now that we end 2003 probable no ability to get a 2003 audit done in the next 3-6 months for 2003 year end. And with no audit, probable no 2004 quarterlies.

Then to make a market and get back in a active trading environment another investment and 3-4 months time.

Total cost as management has stated in past statements on this site $150-250k.

Money, unfortunetly that this company does not have.

In fact I would bet that this company is already running in the estimated: "red" again even though it expected 125-150k from the sale of concentrates considering the electric continues to stay on and the bill grows monthly. In fact I liked the generalizeation which was just made comparing the last little find at the Sixteen to a 110oz per ton mine. Well if that were true, your investment worries would be over.

I don't know what should be done, any ideas?
 By Rick

12/13/2003  7:50PM

What the heck, I might as well weigh in on the subject of the price of today's spot-gold, from one who's never traded any gold for currency, since my tiny collection is my hobby only, everything in it personal finds.

Sometimes close friends ask me about what "this" is worth or what "that" is worth and I only smile, because to melt it down and take it to a bank would yield a loss of memories and a few month's gas-money, not to mention a complete lack of value. But I see their faces glow nonetheless.

This is a difficult concept for the investment-minded-pragmatist to understand, as they stare at a portfolio-stock page or into their deceased grandparent's keep-sake box at what looks like raw, first-time-seen-by-humans gold, as they contemplate what monetary value it could add to the bank account, once someone figures out how to transform it from "stuff" into "money".

I have a close friend with a specimen (one that he found) so spectacular that it defies "art", if we allow ourselves to include those
encounters we silly humans've discovered that are created by that higher power (Lord knows we couldn't pull it off as well)...He's been offered many thousands for this crystaline piece, less than an ounce in weight...and seen under a scope yeilds an insight far beyond the morning's gold-price fix.

(Whoops, losing you?)

Here's my point, relating it to the price of gold: As we encounter the raw form of gold, it's prudent to see it as something other than a melted spot-price entry on the balance sheet. While the price of gold is relative to operational potential, it relates differently to the mega-extractors (who by the nature of their deposits would never have the opportunity to extract specimen, non-spot value) compared to small operations (AKA our 16-to-1) from whom spectacular specimens emanate. (For those of you new here, compare it to meling down family heirloom jewelry and sending it in for an assay and weight assesment.)

But, as economics dictate, it does relate to the price of gold, on some weirdo lever, as I've witnessed while Mike reluctantly condemns exceptional specimens to the flame, only to send it off as tribute in a never-ending political battle to stay afloat.

What a shame that so much beauty has been compromised by political mandate.
 By auriferous

12/13/2003  9:29AM

I for one am happy that gold is trading above $410 right now. Perhaps there really isn't a conspiracy after all....
 By bluejay

11/22/2003  11:10AM

The following is an excerpt from the November 22nd Dow Theory Letters written by Richard Russell(http://www.dowtheoryletters.com).

FYI.....I spoke after the close today with a longtime friend of mine. He's been a trader on the floor in New York for about a decade. I can always trust him to gove me the straight scoop on what's happening and what the chatter is, as opposed to some trader friends who will talk their book no matter how long you've known them.

This guy says something VERY big is happening behind the scenes in the gold market right now and tension on the floor is higher than he's ever seen it. He believes there is now a symstematic, behind-the-scenes effort by multiple buyers to take delivery of as much gold as possible. I asked him what was wrong with that, and he replied that there IS no gold out there in size at any level right now. There's no physical offered in size at any reasonable level, and he said it has never been more of a paper market than now.

I then asked him two questions: Who are the buyers, and has there been Fed intervention? He thinks that the buyers are too large to simply be short or intermediate-term speculators, and says the chatter is that the buying is coming out of Asia. In the terms of the Fed, he said that almost all traders on the floor including him believe the Fed has been periodically intervening to cap the rallies in gold....but then he said something that was somewhat shocking. He thinks the Fed has actually been trying to BUY gold. He thinks the periodic attempts to cap rallies(which he says happened yesterdaay, by the way) have two purposes: to not allow gold to spook the bond market and the dollar, AND to give the Fed a chance to buy gold lower from speculators when the rallies fail.

Apparently, there is some speculation among in-the-know traders that at some point next year, the Fed may be forced by the dollar and bond markets to float the idea of an eventual return to at least a PARTIAL dollar/gold link. Some of the chatter comes from the fact that earlier this year, Greenspan made a speech that started off mentioning how the gold standard had led to stable prices over a long period of time.

In any event, that's the scoop. There was a lot of tension in my friend's voice, and he repeatedly said that something "very big" is happening in (the) market right now. The last thing he said was that he thinks $500 gold within the next 6 months is "a done deal."

Here is another scoop, on last Monday while gold was being forced down by the gold cartel, from about the $400 level to just under the $385 level, I personally witnessed some important buying in the precious metal stocks, especially the silver stocks.
One important point can be made here, the public was not doing any buying that day. The people that were buying the gold and silver stocks on Monday were knowledgeable and wealthy individuals. Two individuals that came to mind were Monty Guild(mguild@guildinvestment.com) and Warren Buffett.
 By bluejay

06/08/2003  10:27PM

Lynwood, I am unable to verify any of those two sources. I just saw and heard about the two on television like everyone else did.
 By lynwood

06/03/2003  11:31PM

Bluejay, just reread all your entries from November 27,2002 to May,o3, 2003. You cite such diverse sources.

Your insight is unquestionably documented for history in the FORUM as to technical and fundamental wisdom. I grew to cast aside criticism when the gold market was freely open to US citizens in 1975.

Can you verify the sources of two separate reports of situations in Iraq? #1. Some $650 million in 100ís found in bundles. #2 Some $500 million of gold found in Mercedes truck. I enjoy your efforts.
 By bluejay

05/03/2003  9:31PM

Gold closed out the month on the COMEX at $339.40. The close is down from a high above $380 about two months ago and is up from a recent low of just under $320. What does all this price movement mean?

From a chart standpoint, the gold price at above $380 marked the top limit of its recently defined monthly upper channel limits while trading lower to about $320 confirmed the strong undertone of the channels over sold line. Both of these upper and lower limits of the channel lines are ascending.

For people that are unaware of the significance of charts and price channels within them, let's take a moment and discuss them.

Charts are a record of price activity usually with volume figures over a specific time period. Charts for simplistic purposes are usually displayed in price range bars for the trading activity in days, weeks and months

Viewing a price chart of a stock, commodity, currency or any other financial instrument is a basic approach to understanding what future prices might be expected. Once accustomed to viewing charts, it should become clear to you that prices usually move in up and down channels of restricted price behavior coupled with price congestion areas that may indicate a directional change of prices to be eventually identified with a new channel of price movement.

Within these ascending and decending price channels, prices become over-bought and over-sold. Gold by hitting just above $380 on the COMEX chart, its top on the rising price channel, and sinking lower to the bottom extremity of its over-sold area has traveled a chart distance of over $60 an ounce within eight weeks. On the graph being viewed, the price history starts in 1994 and includes monthly ranges to its currect close on April 30, 2003. The chart can be view by connecting to tradingcharts.com.

Chart channels are subjectively drawn by the student using high and low price points which are necessary for their construction. All price channel lines are to be drawn parallel to each other.

All of the above was mentioned so you will have a better grasp of the following: For the remainder of 2003 gold can trade as high as $420 by the end of the year and the current over-sold area currently stands at $323. Remember, last on gold is $339.40 on the monthly chart. The current over-bought area in the up channel is currently located at $393. So, what does this price comparison within the channel lines indicate? From a chart interpretation, gold is in not currently over-extended and is much nearer to being over-sold.

The price objective channel range for gold's closing out the year of 2003 will be a low of $347 and a high of $420. If a guess were to be made on gold's exact close at the end of the the year it would be the median point of the range at $383.50. This would indicate a 13% increase by year end for gold based upon its last price on April 30th of $339.40.

Interpreting charts is an art of probability and when combined with other technical indicators can be an extremly useful and unemotional tool as an aid to investing.

Before closing, a short chart discussion of the U.S. Dollar seems appropriate. The Dollar is trading lower on its monthly chart within a descending channel. The close on the Dollar on April 30th was 97.38. This is its lowest close since October of 1999.

The Dollar channel indicates that its price potential in the short term is lower to about 90.00. Its rallying potential is to the 100.00 level. The price of the Dollar is expected to sink lower during the balance of the year.

A lower Dollar will mean a higher gold price.
 By bluejay

03/12/2003  8:39PM

This is a follow-up to an original Forum entry reporting that gold had entered into a new long term bull market on 01-23-03 when it crossed $352.

The current price on gold is $345.50. Soon after the entry gold traded in the overnight gold market in Asia near $390 and has since softened in price toward the $340 level a few times where it has been finding current support. In an emotional news related arena relating to a possible military conflict, expect the unexpected. The technical perspective that gold is heading higher during the years ahead will ease the discomfort of any abrupt short term weakness and will present an opportunity for the acquisition of gold from the discount window.

The important thought, above all else relating to the metal, is that gold is in a major long term bull market. As has been described in other topic section entries on the Forum page earlier, there is a powerful financial group that wants to see gold basically disappear from the financial radar screen.

The source of this group is people and organizations that will be hurt with the rising gold prices. To mention one, is governments who continue to print money that have no official gold backing. As gold rises the basic purchasing power of their created paper money depreciates and its creditabilty declines.

Governments operate off the books mainly through their Central Banks and Treasuries to restrain gold from going up and, hopefully, they can even drive it lower creating instant gratification for their "funny money." Central Banks basically bribe large money interests like investment houses, banks and the media to do their dirty work for them and even their efforts in this endeavor can even filter down through governmental agencies, both State and Federal.

Even as a long term bull market was confirmed by gold advancing past the $352 level, this Group has started working overtime to suppress investor enthusiasm for gold and gold shares. Most investors interested in gold will buy the gold shares instead of the metal mainly because it is easier to acquire and to dispose of. So the gold producing companies are targeted by the media.

There has been some talk lately that this Group has been selling short the gold shares to temper public enthusiasm. Controlling rising prices is easily done when the shares are overextended from an chart standpoint.

It is important to understand the concept of overextended. Go to the website http://www.bigcharts.com. Select a gold stock of interest by symbol or look up the symbol. Bring the stock up on the screen with the chart. Hit the red box marked "interactive charting." Select relative strength to track. Save changes, hit Ok twice and the chart appears with the relative strength chart just under the stock chart. The relative strength chart has a range on the right side from 0 to 100. Just for general instructive purposes as a starter, view what happens on the stock chart in time following the relative strength figures registering at or near to the 80 level. This most ofter indicates that a stock is overextended and will decline.

The key to attacking the gold stock group was zeroed in to the massive resistance problem that Newmont Mining had at its 30 level. The significant problem on the chart was that of a declining or flat moving 5000 day moving average line. Today, Newmont traded under $25 and is approaching an attractive buy area below.

Long term moving average lines are used by the big money players and by the Group players for their market advantage over other less informed participants. The big money players use these averages as an important guide in establishing their agenda in positioning funds for long term profit appreciation. The Group players use them only to apply short selling pressure at pivitol areas when they are present. This is exactly what happened when gold moved higher past $352 and Newmont stalled at the troublesome 30 level over the past months. The Group shorted it to death and it effected all the other gold stocks for the reason that Newmont produces more gold than anyone else and is viewed as the bellwether stock for the group. It's like people watching the Dow Jones Industrial Averages to get the feel of what the rest of the stocks should be doing.

Long term moving average lines of 500, 1000, 2000, 2500 and 5000 days are important and when combined with two or three in the same area, along with relative strength and Bollinger Band readings of significance, can be a most useful tool in identifying stock candidates to purchase that carry with them a reduced risk factor.

Recently, the Dow Jones Industrial Averages broke below a significant level at 7700 on the chart that was never discussed in the media or any investment letters that were available. The area on the chart is the location of the 2500 day moving average line. It had previously supported the DOW from sinking lower on declines on a few occasions or so in the past year or more and this event of penetration more than likely indicates a new down leg on the DOW is in progress.

Getting back to the Group that specializes in bad mouthing gold through negative reporting about the gold companies, a recent degrading of Royal Gold's price was orchestrated by a recent Barron's article. This is a current example of jounalistic predatorial behavior being extended to the gold stocks. Since the L.A. Times' November 2002 story about the Original Sixteen to One Mine, Barron's is now on the point wheeling their hatchet of carnage in the direction of shareholders that hold some of the best equity asset positions that are available in today's seriously ill stockmarket.

The following are comments that were taken from an article titled "The Real Question is: Was the three-day "Trashing" of Royal Gold Legal Long Sellers Or Illegal Short Selling, So Common Today?" by Mr. Jim Sinclair from the http://www.tanrange.com website. The complete article is available under MineSet by Mr. Sinclair at the same site.

"This last period has to be classic. In the last two weeks, I have read no less than nine articles in major publications of one nature or another concerning the ill-advised rise in the value of gold and gold shares. Never in my 44 years have I seen more intense use of the media to attack an investment medium. Then came the assualt against the leader, Royal Gold. Was that event an accident or coincidence? I personally doubt that it was coincidence."

So what does the breaking of the 5000 day moving average line on gold mean here? It means absolutely nothing. The bull market has arrived and it will just be only a matter of time until this child's play ends from the Group attempting to attack a bull market. Some months back Freeport McMoran's stock was declining toward some rising long term moving averages that were congested at roughly the 13 plus area. The stock qualified for purchase or repurchase. In some weeks later the stock broke through and headed lower into the 10 area on the night club/restaurant explosion disaster. Some months later Freeport was headed towards 20. Sometimes stock related news throw you an unexpected curve ball when your dealing with excellent long term moving average ammunition, but overall, they are reliable when interpreted correctly.

In the current gold market atmosphere there is an expected impending action in Iraq which will be reflected in gold's trading personality in some manner or another. The Group has been busy using the media to brainwash the public into believing that gold will travel lower as it did following Desert Storm. The Group, the gold cartel, will do what they have always done, try and maneuver gold lower by enlisting the efforts of all their agents.

If it comes about that there is a war and gold takes it on the chin, expect the price to accelerate way past $400 an ounce in the short time following any manipulated selling. If gold does get temporarily pushed lower, expect the Chinese and the Arabs to buy it all. Don't get sold down the river with your gold assets by believing what you might be hearing or reading in the media concerning the metal prospects following any military action.
 By bluejay

03/04/2003  11:54PM

On the front page of today's Financial Times appeared the following titled article, "Buffett Likens Derivatives to Weapons of Mass Destruction." In speaking of derivatives Buffett warned against them by saying that they were, "financial weapons of mass destruction and potentially lethal" to the economic system.

The Times went on to say, "In his letter to shareholders of Berkshire Hathaway, Mr. Buffett said he and Charlie Munger, the investment and insurance company vice president, viewed derivatives and derivative trading as "time bombs."

Continuing the Times made the following statement, "the bankruptcy of Enron, the U.S. energy trader, in December 2001 came after it began to emerge that it was using derivatives contracts to hide volatile assets and inflate the value of new businesses."

The entire gold market is laden with derivatives. There are more outstanding complex derivatives in this market than Carter has pills. Buffett never mentioned gold in his preview of the forthcoming annual letter to Berkshire shareholders but you have to know that gold is on his mind.

Berkshire Hathaway currently holds 4,000 tons of silver which is 2% of Berkshire's assets. In gold, like silver, there is an annual supply deficit and in both markets there are large outstanding derivatives contracts.

The time seems right for a Buffett position in gold as he recently stated that, "despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us."

Buffet in the past has been buying junk bonds which return higher than normal yields. These bonds yield better for the reason of their attached credit risks. Buffett likes income. Although some of these credit risky companies may not make it during the current bear market, the high returns Buffett has been collecting reduces his risk in them proportionately.

If Buffett does announce gold holdings at the annual meeting or buys some in the future he will be taking physical delivery as he has with Berkshire's silver position. This will be bad news for the shorts or the metal exchanges as the vast majority of their trades are on paper. If Buffett buys gold he will take delivery and the commodity people will have to cough it up. In the past a story had circulated that a buyer of a 100 ounce contract had great difficulty in taking delivery from an exchange. They persisted in telling him to roll over his contract to another month.

As the stock market is at a pivotal juncture with today's close at about 7704 in the 7700 area of the Dow Jones Industrial Averages, one wonders if the market starts to collapse could this event engineer yet another wild card for the holders of gold?
 By bluejay

02/07/2003  9:10PM


An important commentary and reprint from a FINANCIAL TIMES article is available at http://www.jsmineset.com/s/Home.asp entitled "Figures Lie and Liars Figure."

A short Harry Shultz commentary on http://www.financialsense.com today mentioned that gold production will be off 30% over the next 8 years.
 By bluejay

02/06/2003  2:38PM


I am a technical analyst of price movements which means I don't rely on fundamentals but I will make an attempt.

Currently the U.S. Dollar is in an adjustment phase of going lower. Gold will increase in value as the Dollar descends because it will take more of the depreciated Dollars to buy the same amount of gold. The reason for this adjustment process is that in this country we have a current account deficit of 5% of the Gross National Product. This is unhealthy, as 3% has been the norm. If this country gets involved in a war the 5% figure is expected to go higher.

There are others reasons. Our economy is mainly being run on debt purchases. During the 80's consumer debt wasn't anything like it is today. I've heard the current consumer debt is six times larger than our Gross Domestic Product. The high debt condition weighs on the Dollar and in turn puts upwards pressure on gold.

Our trade balance deficit with our other trading partners is at an all time high and it is forecast to even get bigger. Our factories are being shut down and reopened in China. Even the Mexican factories that were opened following the NAFTA agreement are closing and that capital is headed to China. China is fast becoming the exporter of deflation. All this means is that some items we were accustomed to buying that were made in the U.S. will have to be imported adding to the trade imbalance. Also, the imports from China will force what's left of currect producers in this country to lower their prices which will put pressure on their bottom line. This is because the labor rate in China is something like 40 cents a day. This event could cause some debt repayment problems.

I believe from reading many related articles that all this debt will eventually lead us into something much larger than the "soft patch" Alan Greenspan says the country is currently in. I believe we may have a credit crisis in this country and people will want safety and that safety will come from something that carries no debt and that is gold.

In addition, central banks around the world have attempted to depress the price of gold by controlling it with sales and lending it out for short sales for years and this game is about over as all the sold gold has been puchased by smart long term money and the rest has been made into jewelry. It will be difficult to repurchase the metal from short sales and other financial contracts which has been estimated to be from 10,000 to 15,000 tons. As gold goes higher, the sold short contracts are being squeezed to repurchased the borrowed gold at higher prices. After watching markets for years, the fear of an impending short squeeze results in swift price movements. The recent strength in gold to the $390 level a few days ago may be just the start of a new series of patterns where we see gold continuing to trend higher and then a flurry of buying results as the shorts do some partial covering.

Higher prices of gold will be aided in the period ahead with a forecast decline in world gold production during the next five years.

Contributing to higher gold prices is reduced gold hedging and the calling in of part of the past hedging contracts by the world's gold producers. Thus, taking away some of the producer hedging that had pushed gold prices down for the last years.

Another item that we don't hear mentioned too much recently is the fact that demand for gold exceeds world mine production.

I hope I have touched on the most important changes that are different this time. If you would like to be kept up to date with gold news from independent writers visit the financialsense.com web site.
 By Rick

02/04/2003  6:46PM

Last time gold "topped out" it sat over $800, (Thanks Jimmy Carter)while inflation loomed over (correct me, please, since I don't have the actual numbers in front of me) somewhere near 18%.

Bluejay, respecting your perspective: what's different this time, besides that inflation's not even in the picture?
 By bluejay

02/04/2003  1:06PM

One of CNBC's mouth pieces, Ted David, is asking the question, "when does gold top out?" What an ignoramus! Gold has just recently entered the early stages of a new monster bull market. It appears that gold doesn't qualify for any cheerleading from these people.

You can make a safe bet that when gold crosses $400 an ounce on the chart CNBC won't be giving any parties like the big one they gave the day NASDAQ crossed the 5000 level. NASDAQ 5000 was part of the biggest securities bubble of all time.
 By bluejay

01/30/2003  11:41PM

Your attention is directed to an outstanding article relating to gold and a future role that it may play in supporting the Dollar in the year 2005.

"New This Week" 1-30-03
Sinclair Editorial

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