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Gold bugs masquerading as pinstripe bankers / MUST READ

verfasst von JÃœKÃœ, 24.06.2002, 08:10

Sorry für die Lücken im Textfluss.

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http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B285256BDF005C1A9B?OpenDocument
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Gold
bugs masquerading as pinstripe bankers
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 By:
Tim Wood

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Posted:
2002/06/21 Fri 12:00  | © Miningweb 1997-2002

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<td width="100%">PRINCETON,
New Jersey -- The money management arm of one of Canada's most
prestigious banks, RBC Global Investment Management, has issued a
no-holds barred punt for gold. It is thought that top-rated
professional gold investor, John
Embry, authored the
report.

RBC is the first mainstream
international investment house to sign on to the gold conspiracy, at
least publicly, casting the current"suppression of the gold
price" as a covert version of the nonsense of the late 1960s and
early 1970s when central bankers colluded to hold gold at $35 an ounce.

The RBC writer doesn't pull any
punches:"[Gold] will more than rally; it will explode
spectacularly to the upside", thanks to an accumulated short
position in physical gold, overlaid by a mountain of derivatives.

Conspiracy

The report faithfully reproduces
much of the evidence compiled by Reg
Howe, the Boston
counselor who almost single-handedly tried to sue
the treasury-finance complex in Federal Court
and Gold Anti-Trust Action Committee supporters like James
Turk of GoldMoney. The
key strands of the conspiracy case are tied together in a succinct,
useful way for the first time so they are worth reproducing in their
entirety:

a. Aggressive gold lending, which
>from an economic perspective is indefensible, has filled the
supply/demand gap.

b. NY Federal Reserve gold has been
mobilized when the gold price is rising.

c. Timing of Exchange Stabilization
Fund gains/losses corresponds to gold price movements.

d. Audited reports of U.S. gold
reserves show unexplained variances.

e. Minutes
of Fed meetings confirm officially denied gold swaps.

f. Rules on gold swaps revised but
subsequently denied. However, individual central banks have repudiated
the denial.

g. U.S. gold reserves have recently
been re-designated twice, initially to"custodial gold" and
latterly to"deep storage gold."

h. Statistical analysis of unusual
gold price movements since 1994 indicate high probability of price
suppression. The invalidation since 1995 of Gibson's Paradox -- that
gold prices rise when real interest rates fall -- suggests that the
real manipulation began then.

i. NY gold price movements versus
London trading defy odds.

j. Timing of huge increases in
bullion bank gold derivatives is consistent with gold price declines.

k. Rapid
decline in U.S. Treasury holdings of gold-backed SDR certificates is
not explained.

The report goes on to trash gold
bears betting on a continued flood of central bank gold."The
shibboleth of central bank sales will undoubtedly be trotted out again,
but it is losing its sting, particularly if the possibility that as
much as half of all the central bank gold may already be in the market
starts to become more widely recognized."

Which brings to mind an extract
from Galbraith's bestseller, Money
(to be enjoyed rather than believed),
about debasement. The
Bank of England (them
again) hauled out some
plundered Spanish currency and overstamped the head of the Spanish
monarch with that of King George III; inspiring a poet to pen:"The
Bank, to make their Spanish dollars pass, stamped the head of a fool
on the neck of an ass."

By RBC's reckoning, there is going
to be a heck of a lot of overstamping in future.

The report takes a potshot at
competitor Deutsche Bank as a culprit in the suppression mechanism:
"There are strong rumors that Deutschebank has borrowed an
enormous amount of gold (more than $10 billion worth) from the
Bundesbank over the years to facilitate the carry trade, producer
hedging, etc. and it is becoming apparent that there is no way they
will be able to pay it back. Perhaps, to make good on their gold loans,
they will reimburse the Bundesbank with stocks and bonds and Mr.
Welteke [Bundesbank boss]
is readying the German public for this with his statements."

Gold equities overvalued?

There were comforting words for
gold equity buyers nervous about valuation levels. South Africa's most
reliable gold equities forecaster in recent years, Nick Goodwin, is
sticking to his guns that the sector is in the middle of a whipsaw
with a savage retracement from current valuations.

Referencing the Nixon-Carter gold
boom of the late 1970s, the author write:"Then, as now, gold
stocks rose to prices that made no sense to observers who had a static
view on gold prices, but the stock buyers knew that sharply higher
gold prices were inevitable.

"Gold stocks are perceived by
many to expensive, but, in fact, they are considerably cheaper than
they were in the late '90s. The central banks' overt attempts to bring
the gold price down at that time removed the premium in gold shares
and it is now gradually being restored as confidence returns to the
sector. In fact, if the gold prices were to rise sharply, I would not
be surprised if the price to NAV continued to rise due to a shortage
of viable gold stocks."

Economics

Much of the report's argument on
fundamentals is by now familiar to those who have been following the
gold story:

1. Unsustainable Supply/Demand
Imbalance

Falling mine production (there is
about a 5-year lag between production and prices) with demand being
met solely through central bank sales that would dry up at higher
prices.

2. Unsustainable Short Position

"A rising gold price stands as
a direct repudiation of allegedly responsible central bank monetary
policy" and may be the real motivation for aggressive gold
reserve destocking through outright sales or physical loans."The
size of the short position (gold owed to central banks by lenders),
officially acknowledged to be more than 5,000 tonnes by bullion bank
apologists, is thought to be well over 10,000 tonnes and may exceed
15,000 tonnes. To put this in context, this constitutes between
one-third and one-half of all central bank gold, and the vast majority
of it is no longer accessible."

3. Unsustainably Low Inflation

"Inflation is a monetary
phenomenon and the aggressive interest rate cuts and monetary
expansion to avoid recession/deflation is expected to result in
re-inflation." Gold is the early warning device for dollar
inflation (since that currency is numeraire) and rises and falls
accordingly.

"Year-to-date, the liquidity
injection is more than $1 trillion and MZM (broad money supply) has
grown by 16.5% in the past year. To avoid debt default, the Fed must
err on the side of ease, virtually ensuring upside pressure on the CPI.
In addition, the"war on terror" superimposed on Bush's
mammoth tax cuts and a four-year government real rate of spending
increases that is the greatest since the '60s portends large U.S.
government deficits, yet another recipe for inflation."

4. Unsustainable U.S. Dollar

"The
U.S. dollar has been levitating"…
absent the correct fundamentals. The key danger is the U.S. current
account deficit which exceeds $400 billion annually and is only
sustained by its recycling into dollar debt instruments."However,
foreign appetite for U.S. securities appears to be ebbing and the
chart on the U.S. dollar looks very toppy. Gold is already in a bull
market in U.S. dollars, and an established bull market in every other
currency."

5. Unsustainable Prices for
Financial Assets

"Western world investment
demand will be the true fundamental that drives gold much higher. Gold
tends to be counter-cyclical and investors buy it when financial
assets begin to lose credibility."

"The ratio of the S & P
500 Index to the price of gold reached an all-time high, by a
considerable margin, in 2000, but this parabola has been broken and a
downward trend is in effect. At
the margin, if a small amount of money is moved from financial assets
into gold, the price effect on gold will be dramatic and the ratio
will continue to move in gold's favor."
(Miningweb emphasis
- this is the anticipated momentum factor that is currently
underpinning gold and silver equity valuations.)

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gesamter Thread:

Gold bugs masquerading as pinstripe bankers / MUST READ - JÃœKÃœ, 24.06.2002, 08:10
- Re: John Murphy (GATA ) hat sich fast nicht mehr eingekriegt vor Begeisterung - kingsolomon, 24.06.2002, 21:43