-->So Close, Yet So Far Away
by James Sinclair
October 8, 2002

What a difference 32 years makes.

Today the majority of the gold crowd sees gold and it's representative shares as just another kind of Tech.com trading vehicle. After three decades have passed, during which gold was not mentioned along with the word"investment" for fear of labeling yourself as a barbaric relic, there have been eleven months of a resurgence. That resurgence however has resulted in a strange phenomena wherein the gold share crowd is totally devoid of any professional participation; while gold bullion has appreciated approximately $60 without any public interest, even of the commodity public.

Meantime four of the required five fundamental factors supporting a bull market in gold have come to the party. Situations highly supportive to the price of gold have taken form to the degree that the Chairman of the Federal Reserve yesterday made a special address on derivatives and consumer demand for goods and services. Mr. Greenspan praised derivatives as vehicles for the management of risk being used by the U.S. banking system with great success. He applauded at length this cesspool of unregulated, unlisted, unfunded, non-transparent paper now driving more than one banking institution toward the wall of potential insolvency. No mention was made of the fact that last-risk derivatives do not spread the risk factors far and wide like a listed commodity market for grains does for farming. Rather, last-risk derivatives concentrate the risk, as there are fewer and fewer players as one shops for insurance against defaults of the indebtedness of major corporate entities. The mathematics of these instruments makes one wonder who is the last risk taker? My only conclusion is it must be a non-guaranteed subsidiary of a Chaiwalla Ltd. in Calcutta behind Horwith Station.

Mr. Greenspan also praised the use of refinancing of citizens' homes for providing the muscle to continue to buy consumer goods like auto and refrigerators. The new gold crowd must really believe this, because they took that signal and no war today, as one more opportunity to throw their shares onto the market even though gold's reaction was muted. No problem, with gold shares under pressure from the gold crowd before gold weakened to any degree, the US hedge fund manager will give gold bullion a going over.

Gold is money when money fails. I can go at this fact from many different ways, but maybe it is useless to try because the majority of you see gold as just another form of Tech.com. That probably secures a huge price for gold when all the magic juju of our financial leaders fails. That also probably says that after gold violently balances the balance sheet of the USA at $1450 to $1700 in a massive short cover, it will come down faster than it went up. The net result of that should sell a lot of books for Mr. Prechter, but in that order. Too bad. Gold could have saved the day and given a platform for a multi-generational regeneration of solid, long-term non-inflationary growth. But hey, there would be no Tech.coms to deliver instant gratification in that scenario.



<ul> ~ Quelle</ul>