Gold Discussion for Investors and Market Analysts

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(Sat Jul 05 1997 00:05)
@ Kondratieff
Kondratieff: Be more specific. You speak in circles. What exactly are you trying to say?

(Sat Jul 05 1997 00:17)
Dear Steve P., Thank-you for quoting Dr. Kurt Richbacher ( kitco disc. entry of July 4, 1997 22:23 ) . I have part of a newsletter of his,
dated "March, 1990" ( "No. 203" ) , which quotes Pres. Herbert Hoover, May 1, 1930:: ""We are not through the difficulties of our situation, but I am convinced we have passed the worst and with continued effort we shall rapidly recover.""
The address I have for Dr. Kurt Richebacher's newsletter ( -of March, 1990 ) , is/was as follows.

English Correspondents:
Hahn Capital Partners Inc.
1175 N. Service Rd.
Oakville, Ont., Canada

(Sat Jul 05 1997 00:24)
Millions of ounces @ gone where ???????
Puetz @ 23:34 : I have some gold numbers, that could be of interest.
*Canada* Central Bank, Gold Reserves.
1960.....25.3 oz. ( millions )
1965.....32.9 oz. "
1970.....22.6 oz.
1975.....22.0 oz
1980.....21.0 oz.
1985.....20.1 oz.
1990.....14.8 oz.
1997.....03.1 oz. ***************
1960.....508.7 oz
1965.....401.9 oz.
1970.....316.3 oz.
1975.....274.7 oz.
1980.....264.3 oz.
1985.....262.7 oz.
1990.....261.9 oz.
1960.....80.0 oz.
1965.....64.7 oz.
1970.....38.5 oz.
1975.....21.0 oz.
1980.....18.8 oz.
1985.....19.0 oz.
1990.....18.9 oz.
1960....4.2 oz.
1965....7.1 oz.
1970....6.8 oz.
1975....7.4 oz.
1980....7.9 oz.
1985....7.9 oz.
1990....7.9 oz.
1960....62.4 oz.
1965....86.9 oz.
1970....78.0 oz.
1975....83.2 oz.
1980....83.3 oz.
1985....83.3 oz.
1990....83.3 oz.

(Sat Jul 05 1997 00:27)
re: Date: Fri Jul 04 1997 20:57

Donald ( @Home ) :


(Sat Jul 05 1997 00:27)
Hepcat ( AKA John )'re 325 call was good. However, to be a serious player, you need to be right the next 4 times, as well. I could've just as easily called a 7800 Dow and looked like a hero yesterday. Or called a 7500 Dow and looked like a schmuck. Please tell me what Wednesday next gold will close at. And why it will close there. Also, I need a reading for about 28-30 July when my futures expire.

The Wizard
(Sat Jul 05 1997 00:34)
@ Ozymandias
Dear 6pak et al,
Yes, it's true: Oz, & Switzerland, are one & the same.

Senator Blutarsky (ret)
(Sat Jul 05 1997 00:45)
@The Kitco Bash

NOTHING is over until WE say it is. Was it over when the Germans bombed Pearl Harbor? Hell no! And it ain't over now. We are going to have a BASH!

The Wizard
(Sat Jul 05 1997 00:57)
@ OZ
Dear Sen. 'Blut.' and/or 'We',
Do you mean it was that pure, aryan race; rather than a tribe from Asia, that bombed the Pearl ?!

Senator Blutarsky
(Sat Jul 05 1997 01:14)
@The Wonderful Wizard Of Oz

Wizard-Don't pull a Niedermeier on me. Aryan Schmaryan, is gold a good buy now, or a good bye?

(Sat Jul 05 1997 01:31)
Kondratieff :

Excuse me, but may I remind you that your theory is based on a gold monetary
system. You said yourself, that the length of each cycle would be
expanded when the gold backing is removed. If I remember correctly,
you said something about goldless money only being a short term solution
to problems. Now we all know "short term" is a relative time frame,
even from you. By the way - why didn't you get your book published in
English? I had to read a version translated from german. I hope it
was translated correctly.

One more question: was publishing your papers worth it?

Just a Lurker
(Sat Jul 05 1997 01:40)
underground economy
Jerry Stratton & Kidsilver:

Jerry, you touched very briefly on the privacy issue of cybercash. This is crucial with respect to gold. If it is not possible to give the masses the perception that private transactions can be had in an electronic system, then gold must flourish. The key words are "underground economy"

As long as taxes exist there will be a desire to not pay them. The strength of this need correlates directly with the rate of tax. In some important countries cash transactions to avoid taxes are as much as part of the culture as happy hours or an aperatif before supper.

Since paper will no longer be available as a medium of exchange, and assuming no confidence in any type of "private electronic cash" that leaves only gold. Bartering is an alternative, but it would be a lot less efficient than exchanging pretty pieces of yellow metal.

So either the black market economies of the world will surface and begin kicking in some tax revenues, or they will find another way. "Life will find a way.." as stated by Jeff Goldbloom in Jurassic Park I and the same will hold true here. The underground economies will find a way. And the "way" will be gold.

All you have to do now is ask all the underground economy leaders of the world to send in the GNP numbers and then we can figure out how much gold will be needed to fill the vacuum! I don't know how big the number is, but I bet it would dwarf all the central bank sales that are happening now.

Bill Buckler
(Sat Jul 05 1997 01:48)
Earl ( Jul 4 21:41 ) I have been doing my very own unofficial "survey" on that question for years. Ask people what the backing is behind the currency and 7 or 8 out of ten will say Gold. That's true now in Oz and it was true in North America when I tried it there.

All: Physical gold purchases by "ordinary" Aussies was up four to tenfold on Friday after the RBA sell off became common knowledge. This is a startling development! It would seem that the "common people" figure that Gold is now cheap. I will be expanding on this in the next issue of The Privateer - out tomorrow.

`Mother Theresa
(Sat Jul 05 1997 01:57)
@ Administering To The Poor At Kitco

Hey! Who do you think is buying gold? As someone said earlier, Hong Kong, Japan etc., have been buying all the way down to $325. This is the Mother Of All Bottoms.

(Sat Jul 05 1997 02:42)
Cmax.... You are doing better than I am, because lately
when I buy, It goes down the SAME day.
PS I also bought last week, and plan to buy more next week.

(Sat Jul 05 1997 02:53)
My Friends; Everything has it's own's own rhythm. Fear, greed and excessive hope blocks our ability to recognize the song being played. Each note stands out glaringly in our overinspection to hide the stanza behind. When this is over, we'll all say, "why didn't I see that...all I had to do was...". Patience rules. Plan your strategy ahead, ie, "if gold ( the price ) does this, I'll do that...and be faithful to your strategy! Someone here said that they didn't care where ( it ) went...I suggest that what they meant was that they were prepared for any event, ( they had a plan ) . .......Everything to it's season. Gold will rise again. Be prepared.

(Sat Jul 05 1997 03:09)
I also bought last week...and next week I'll probably buy some more ( it's in the plan ) but, I'll probably sprinkle some layered puts along the way ( down ) to provide some "braking" ( if needed ) . My commodity account has been bleeding...but it's not terminal! ... Please God.......... ( prayers are part of the plan ) .

(Sat Jul 05 1997 03:23)
@The Senate

Savage: Your wounds shall be healed. We are not far from a Gold Bull Market.

(Sat Jul 05 1997 03:32)
There seems to be an interesting situation going on with Crystallex KRY.T, an ownership dispute in the Venezuelan Courts, over gold mine being started by Placer Dome. Shares up to 6.60 as people want to get in before Tuesdays expected court decision, in which many expect Placer to lose. But there may be a lot more risk here than meets the eye, and my feeling is to stay away from this one. There has been very little legal information given out in the newspapers and by the company itself, as to the actual details that the dispute. The Peter Grandich newsletter has put out about 10 articles about without in my opinion, giving any clear reasoning as to why he thinks the company is going to win. Not enough discussion of fact going on, too much rumor. As with many things, the lack of clear information to base decisions on has lead to more hype, speculation and unbalanced information being circulated. If they win the shares will do well, but the current share price assumes that they are going to win at least 30% of the property. Very interesting situation, but a lot of money is being bet on this, perhaps without enough due diligence on the part of the buyers?? I don't know, guess we will see on Tuesday.

(Sat Jul 05 1997 04:01)
Bottom Fishing
Mooney - Regarding your concerns about my silver post of evening last: I obviously was not picking a bottom, but an entry point. I like silver at 4.50, if it goes to 4.40 I'll like it more. This is very different from those who would "buy if it hits 4.39". I think the big $ is to be made in the middle. I happy when I get within 10% of a bottom or top, in a volatile market, 20%. The 60 - 80 percent in the middle is where the $ is made. I obviously don't have a clue as to where a bottom of silver or gold is. If I were waiting to buy at the bottom, the 20,000 oz I bought at 4.63, and the 100,000 oz I bought at 4.57 would be in someone elses hands this moment. I wanted to make no recommendations, only to share what I will look for and where I will most likely buy. These numbers were in response to specific questions.. If I understand your reasoning in your question to me. Wouldnt any buying at any level, by you standards, be bottom fishing? My main goal was, in response to questions of methodology, to show that you buy at a good price, because it is a good price. Lacking other factors that weigh against your trade, you must ask, Does it make sense to buy it here? If so, do the trade. There is no bottom fishing here, only an understanding the possibility of silver going lower exists. Why not wait until 4.40 to buy, then? Because it may never happen, ever. We could head back above 5.00 and stay there for years. I would not want to miss that ride, so I like my 4.50 - 4.60 silver. Im surprised, you seem to have an in depth knowledge of these markets, the preceding was more simple common sense than any trading strategy. Those that wait for their price, rarely see it.

(Sat Jul 05 1997 04:51)
Molten Gold
My own 06:26

Green? The stuff is GREEN? All the gold I own is now a blackened, sooty, mass at the bottom of the Nixon cast. I Preheated the acetylene, added the 123 octane, and threw in some piccolo petes for good measure. I knew that I would then have enough raw heat to not just melt that gold, but to actually make it molten. The explosion was tremendous and the aftermath was covered live on all the local news stations. Some of the aerial shots made the network link and CNN broadcast the inferno globally. I was spared death and serious injury buy dumb luck. I was tossed behind my safe by the first blast and the 2  inch steel walls must have protected me. Forgot to close the safe before ignition, so all inside was destroyed.

My physical injuries were relatively mild and I guess the doctors were right when they kept telling me I was lucky. They say my eyebrows will never grow back, which is unfortunate because it makes me look as if I am permanently astonished. The burn in the forehead will heal with time but the scar will remain for life. It wouldnt be so bad having the imprint of a Maple Leaf staring back at me when I look in the mirror, but people keep asking me what DLOG ENIF 9999. means. Interestedly enough, the words right themselves again when reflected back at me. Well, at least I didnt get the other side of the coin. I couldnt bear looking in the mirror for the rest of my life with Queen Elizabeth starring back at me.
The doctors let me go home today to pick up the treads of my shattered life. My home was entirely demolished, all my worldly goods, gone. While dejectedly picking through the rubble, I lifted a charred beam and my heart soared! A perfectly intact platinum Maple Leaf! Not even the scorching heat of the initial blast and resulting fireball - which was estimated to be in excess of 3000 degrees - could harm that little beauty. I fell to my knees and wept thankful tears, for I had recently bought a lot of platinum, I was not ruined! I vowed to never forget this painful lesson. Play with gold, and youll get your fingers burned ( eyebrows too ) , hold platinum, and your future is bright. All this in response to a question innocently posed, what is the color of molten gold?

(Sat Jul 05 1997 05:01)
STEVE PUETZ: Who bought? My gut feeling is the Japanese. However the Van Eck Report ( which has been bullish for several months ) details the following for 1966:
Central Bank Sales

Dutch 300 tons
Belgium 203 tons
16 others 85 tons

Central Bank Purchases:
19 Banks 349 tons

They report that the two largest purchasers were China and Russia during 1996 but don't give any figures. They see Russia as a large future purchaser in their June, 1997, report.

(Sat Jul 05 1997 05:12)
@Emergency Room Physician

RJ @ 04:51--Sorry to hear that you got burned by gold. Think of this as a golden opprtunity. Gold is going to $500 in the next three years, right?

(Sat Jul 05 1997 05:17)

Donald: Van Eck? Is that from Adrian and Jonathan?

(Sat Jul 05 1997 05:28)
Yes. I think Jonathan does the Gold Report and Adrian ( his father ) does the editing. Also, I erred on the date. 1966 should have been 1996. Just like in high school, still having trouble with my dates.

(Sat Jul 05 1997 05:40)

Donald: Adrian is a very smart man. So is Jonathan. I listen to them very closely. If you post your e-mail address I can send you their latest thoughts on gold and the economy.

John Disney
(Sat Jul 05 1997 05:40)
To All
Will someone check my numbers?? I make 160 tons of
Aussie gold sales to be in the order of 5 million oz,
or about 1.7 billion$ worth or bonds ( or gold ) . The
interest on this would be about 120 million $ US per
year that the Aussie will get from the US bonds in
freshly printed new bond interest.
On the other hand, Taking the market cap of the 12
biggest Aussie gold producers I get about 5.5 bill. $
US. In a healthy gold climate these companies would
have say a 20/1 PE, then the total earnings would be
about 250 mill US. Take company tax plus tax on divs
at 40% and you get a number like 90 mill$ in offsetting
lost tax income.
( Actual tax on these companies in 1996 was about
85/90 million $Aus- say 65 mill US )
Also, the income tax of any miners thrown out of
work will be lost, and unemployment benefits to them
will be a new cost.
Shareholder who lose on the deal will take losses
to offset capital gains in other sectors, so more
intangible tax revenue will be lost. I cannot see how
this could have been in Australia's interest unless they
were SURE the gold price would fall ANYWAY and close
down ALL THEIR gold mining companies whether they sold
or not.
If this plan is so clear even to fairly brain dead
government bankers how come Gold Mining management
doesnt know about it ( much less us ) . Mining Management
here is trying to do a three year deal with the unions
- why ??. Can a World Wide secret plan to close down
gold mining be so well kept ( even with Andy Smith
babbling the information to the world pretty well
free of charge at every opportunity ) .
Why did the Aussies do it.
Are CBs stupid? Is mine management stupid? Are my
numbers stupid ( most likely ) . Are investors stupid??
Are we all stupid?? = Tune in next week for the answer
to that question. ( When Im sure Mr hep the cat will
tell us all )

(Sat Jul 05 1997 05:52)
I subscribe to their Gold Letter so I should have it already unless there is something new. Thanks. Their stuff is well written, well detailed.

(Sat Jul 05 1997 06:05)
JOHN DISNEY: Is the RBA like the Fed in the USA? Are they privately owned? Did they act in their best interest rather than the interest of the Australian people? Was their arm twisted by US?, Japan? Do it or we will break your knee-caps? Who knows. As I said in an earlier post, central bankers are people just like us. They are not immune from bad investment decisions.

(Sat Jul 05 1997 06:06)
$600 in 2000

Donald: Yes. Jonathan did allow for a panic spike down in gold. Looks like we got it. Adrian is very bullish on gold. Any thoughts?

(Sat Jul 05 1997 06:43)
KITCO: Stocks look like a poor investment when I have to give of 24.67 ounces to buy one unit of the Dow. Ditto at 1680 ounces for silver. Of all the investment opportunities, stocks, bonds, real estate etc. precious metals seem the best. Although gold looks good I would't use leverage to buy it at this point...just in case. Gold and silver are at their lowest price in 31 years. Stocks are at a 100 year high. Buy low, sell high still seems like the way to make money. But then again, we are dealing with a stock mania. Stocks can go higher in spite of the strong case against them. Japan is an example. In spite of a 50% haircut since 1990 they still have a p/e of 60 or something over there.

JOHN DISNEY: I hope your thoughts are picked up by the Australian press over the weekend. The RBA needs a public lesson in accountability. I just took a bike ride down to the beach store to get Barron's, 63F and sunny here, it's going to be a nice one. I will look through Barron's now and post anything useful.

(Sat Jul 05 1997 06:50)
Sooner than later the central banks wont have gold to sell or not as much. Gold production is falling, demand is increaing in developing nations. Just like everything else inflation follows a cycle, look out its just around the corner. You know what they say, the best time to buy is when everyone is the most pessimstic. That time may be coming close.

(Sat Jul 05 1997 07:02)
@Grand Finale

Donald @ 06:05-- Yes, I think force was used to try to break the back of the gold market. Guzman's family might agree. Gold got hit, and hit hard this week. It is possible that the "Chicago Bears" have shot their wad.

(Sat Jul 05 1997 07:29)
RJ's explosion
RJ: Sorry to hear about your accident. I guess you are not the first to get burned by "tricky Dick's" face.

(Sat Jul 05 1997 07:33)
Gold Production Costs
I wonder which Gold's Production Costs figure is correct :

1. Danna said on 4/7/97 : " The average world cost of production is US$317. One third of world production is uneconomic at current prices. "

2. The Australian newspaper on 5/7/97 Sat reported that " Australian [ gold ] producers have emerged as the world*s most expensive producers with average costs of $US294 an ounce. "

3. Selby ( Toronto ) on 5/7/97 said, " the average cost of production of about 275 "

Any comments ?

George s. Cole
(Sat Jul 05 1997 07:37)
Richard Burke: Thanks for the TSE info!

Gene: I believe Hashimoto was referring to the dollar/yen, not the stock market or the bond market.

WW: You may be on to something by arguing that one of the main reasons for the gold war is to maintain bonds' safe haven status when the market tanks. The fact that bonds surged after the 1987 crash was a good sign that the system would quickly recover. If bonds were to crash along with stocks or at least not rally as stocks tank confidence in the current financial system would be shaken to its foundations.

Vieserre: In the current investment paradigm, economic growth and expectations thereof have little or nothing to do with the gold price.

Captain Bill: Thanks for the info re: Aussie gold stocks and the jump in bullion purchases by average citizens. If these purchases continue at a strong pace people like Alan Greenspan and Bob Rubin won't be happy at all.

I have commented about the gold bashers moving to kick the yellow stuff every time it raises its head an inch. When gold is able to raise its head a little and KEEP IT THERE for a few weeks, good chance the worst will be over.

Mike Sheller
(Sat Jul 05 1997 07:51)
@reincarnated alchemist
RJ: I am rolling on the floor, tears of laughter in my eyes. Thanks.

(Sat Jul 05 1997 07:55)
Alan Greenspan in his famous article on gold stated "The law of supply and demand is not to be conned. As the supply of money ( of claims ) increases relative to the supply of tangible assets in the economy, prices must eventually rise." He was then stating what he believed a universal truth. However in the truely human irony of our deceitful political times, Greenspan himself helped write what we may call Greenspans corollary, "Prices need not rise if the credits can be locked up in the financial system." And I will add my own "However should a nation undertake such a reckless course of action it risks its very existence."

Steve - Perth
(Sat Jul 05 1997 08:04)
PANDA: TYX bond chart on the knocker. You may see a drop below
point 4, then a strong rebound up for 5. I noticed the exact same
pattern in the Australian Resource Stocks Index for the past 6 months on the Privateer Charts web page.

Steve - Perth
(Sat Jul 05 1997 08:09)
Been away at the farm, in the real world. Hands are stiff from shovelling & hoeing weeds from young vines ( wine grapes ) . Harry Schultz is most likely the IMO at Honolulu. He has been in Guiness Book of records for 18 years.

Steve - Perth
(Sat Jul 05 1997 08:16)
Checked with contacts again. Rothschild's people STILL waiting to buy gold stocks in Australia. They have a big kitty. They say at least US$300, & wait for a few months yet. My french contacts now after the Aussie Bank sell off news still sticking to US$127 to US$135 an oz for Gold LONG TERM. ( Poss by Sept ) Will be $300 in a fortnight, & may have a short term spike, but drop down & stay down. That would put the wind up Harry Schultz. There is something big going on here.
DEFLATION??: After a 20 year decline, US farm workers Union on a big push to recruit new members.
More posts to come, but my favourite TV show is on. Bye.
Ps. The Hepcat/RJ deal yesterday was PATHETIC!!!!!
I have never met a sane Doctor yet.

(Sat Jul 05 1997 08:18)
STEVE PUETZ, KITCO: Monetary Base up 4B in this report period. Reversing a several week trend significantly. Here is more food for thought: M2 is FLAT ( Seasonally adjusted ) and DOWN 34.9B ( not seasonally adjusted ) . The Monetary base injection didn't do anything for M2. Figures are from Barron's, out today. Randall Forsyth ( Current Yield ) says FOMC is "baffled" ( about inflation ) and cites the recently released May minutes of the committee to make his case.

(Sat Jul 05 1997 08:19)
Hang in! I'm having a canister of laughing gas couriered to you immediately!

Mike Sheller
(Sat Jul 05 1997 08:27)
no con do
BW: And the metaphysical "law of correspondence" is not to be conned either. It is not for nothing that the Fed Chairman destined to preside over the most gargantuan credit and financial asset expansion in US history is named "Green-span."

(Sat Jul 05 1997 09:03)
RJ - Re: Your 4:01 - Its not that I question your present Silver purchasing strategy - I don't, I think its very well reasoned and timely - Its just that your treatise at 1:30 yesterday in which you said, "The most important advise I can give anyone is to never buck the trend. ", did not seem to jive with your 1:47 as we have obviously been engulfed in a down trend.
I agree with the strategy to start making purchases in 'chunks' once you feel that the price has become reasonably close to a bottom. Further purchases can then be 'layered ' in as either the price heads north, ( if you've been lucky enough to make your first purchase near the absolute bottom ) , or if the price dips further, ( thus averaging down your price AND accumulating on weakness ) . It must be realised by participants, however, that this method may turn either a quick profit, ( if one catchs the market near the turning point ) , or it may turn into a long term buy and hold strategy if the market continues in the doldrums for an extended period. Having said all that, however, we are in total agreement that NOW is a good time to start the accumulation process.

(Sat Jul 05 1997 09:03)
@Something to Think About...
THE LIBERTARIAN, By Vin Suprynowicz
Most Americans should be ashamed to celebrate the Fourth

What an inconvenient holiday the Fourth of July has become.

Oh, so long as we stick to grilling hot dogs and hamburgs, hauling the
kids to the lake or the mountains, and winding up the day watching the
fireworks as the Boston Pops plays the 1812 -- written by a subject of the czar to celebrate the defeat of our vital ally the French -- we can usually manage to convince ourselves we still honor the same values that made July 4, 1776, a date which rings in history.

Great Britain taxed the colonists at far lower rates than Americans
tolerate today -- and never dreamed of granting government agents the power to search our private bank records to locate "unreported income." Nor did the king's ministers ever attempt to stack our juries by disqualifying any juror who refused to swear in advance to "leave your conscience outside and enforce the law as the judge explains it to you."

The king's ministers insisted the colonists were represented by Members
of Parliament who had never set foot on these shores. Today, of course, our interests are "represented" by one of two millionaire lawyers -- both
members of the incumbent Republicrat Party -- among whom we were privileged to "choose" last election day, men who for the most part have lived in mansions and sent their kids to private schools in the wealthy suburbs of the imperial capital, for decades.

Yet the colonists did rebel. It's hard to imagine, today, the faith and
courage of a few hundred frozen musketmen, setting off across the darkened Delaware, gambling their lives and farms on the chance they could engage and defeat the greatest land army in the history of the known world, armed with only two palpable assets: one irreplaceable man to lead them, and some flimsy newspaper reprints of a parchment declaring: "We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are Life, Liberty, and the Pursuit of Happiness -- That to secure these Rights, Governments are instituted among men, deriving their just Powers from the Consent of the Governed, that whenever any Form of Government becomes destructive to these Ends, it is the Right of the People to alter or abolish it. ..."

Do we believe that, still?

Recently, President Clinton's then-Drug Czar, Lee Brown, told me the role
of government is to protect the people from dangers, such as drugs. I corrected him, saying, "No, the role of government is to protect our liberties."

"We'll just have to disagree on that," the president's appointee said.

The War for American Independence began over unregistered, untaxed guns,
when British forces attempted to seize arsenals of rifles, powder and ball from the hands of ill-organized Patriot militias in Lexington and Concord. American civilians shot and killed scores of these government agents as they marched back to Boston. Are those Minutemen still our heroes? Or do we now consider them "dangerous terrorists" and "depraved government-haters"?

In "The Federalist" No. 46, James Madison told us we need have no fear of
any federal tyranny ever taking away our rights, arguing that under his
proposed Constitution "the ultimate authority ... resides in the people
alone," and predicting that any usurpation of powers not specifically
delegated would lead to "plans of resistance" and "appeal to a trial of

Another prominent federalist, Noah Webster, wrote in 1787: "Before a
standing army can rule, the people must be disarmed; as they are in almost every kingdom in Europe. The supreme power in America cannot enforce unjust laws by the sword; because the whole body of the people are armed, and constitute a force superior to any band of regular troops that can be, on any pretence, raised in the United States."

Is this still true today? Or are those who arm themselves and make
contingency "plans of resistance" against government usurpations instead
branded "conspirators" and "terrorists," and ridiculously associated with
Timothy McVeigh ( who was kicked out of the only militia meeting he is ever known to have attended -- in Michigan -- and whose actions surely reflect more directly on the screening process of the outfit that gave him his training in munitions -- the United States Army. )

In Phoenix last week, an air conditioner repairman and former Military
Policeman named Chuck Knight was convicted by jurors -- some tearful -- who said they "had no choice" under the judge's instructions, on a single
federal "conspiracy" count of associating with others who owned automatic
rifles on which they had failed to pay a $200 "transfer tax" -- after a
trial in which defense attorney Ivan Abrams says he was forbidden to bring up the Second Amendment as a defense.

Were the Viper Militia readying "plans of resistance," as recommended by
Mr. Madison? Would the Constitution ever have been ratified, had Mr.
Madison and his fellow federalists warned the citizens that such
non-violent preparations would get their weapons seized, and land them in
jail for decades?

Happy Fourth of July.

Vin Suprynowicz is the assistant editorial page editor of the Las Vegas
Review-Journal. Readers may contact him via e-mail at> The web site for the Suprynowicz column is at


Vin Suprynowicz,

Voir Dire: A French term which means "jury stacking."

(Sat Jul 05 1997 09:10)
escher - Re: Your 3:32 - I agree. As I said here a few weeks ago, at this point it is a crap shoot and good go either way. However if some of the recent stories we seen in the paper are true then KRY must have something, otherwise why would Placer try to initiate discussions with them?

(Sat Jul 05 1997 09:21)
"In the past 1,500 years of English history, I can think of no public act more disgraceful than the handing over of 5 million of the Queen's subjects to a totalitarian slave state."
--Sean Gabb

"We may tolerate some freedom of speech, depending on what they try to say."
--HK's New Red Party Boss

"The People's Republic of China has reclaimed a great city, and put a lot of money in its bank account with one stroke."
--Tom Brokaw of NBC

Notice that not once did the words "Freedom or Red or Communist" ever get mentioned by the news media during the coverage of the celebrations? And that "Liberty" was only mentioned one time when Tom Brokaw stated "There are so many questions left to be resolved ... about individual liberty." I did however lose track of how many times the word "Stability" was used...

(Sat Jul 05 1997 09:24)
@More Good News
Beginning July 25, access to Barron's Online will be by PAID subscription only. The price is $49. per year. But print subscribers to Barron's will be eligible for an introductory rate of only $29. per year.

(Sat Jul 05 1997 09:32)
@Gold Bull

If gold gets to $400 or better I can retire. I can then take $500,000 out of my pension stash and still have $500,000 left. I will have to pay a 10% penalty plus 30% in federal and state taxes. With the $300,000 left I can become FREE. I am ready.

(Sat Jul 05 1997 09:46)
@...CB gold strategy comment and gold miner costs in RSA
John Disney: Your review of the Aussie CB gold dump in relation to Aussie gold mining industry tax benefits is well reasoned.

I wonder if the world's CB's have agreed to rally around three main currency-backed assets - US$, DM and YEN, in order to direct consolidation of global money toward a world currrency mechanism- much like a Bretton Woods 21st century plan ?

I considered that - up to now - the US, German, and Japanese have not changed their collective gold holdings while lesser nations have been dumping gold in a round robin fashion.

The point is that we may be in for a series of gold dumps yet but eventually the minor nations will complete their sales programs and the market will focus on the fact that the largest economies in the world still hold a stable amount of gold. ( I am aware that the Japs have sold most of their gold over the past 10 years - but have not engaged in any recent dumps. )

A further point is that if gold price will consolidate around $250 before the CB Bear bootoms ( as some suggest ) the action in the gold market should "now" focus on the gold miners instead of the metal.

Afterall, the paper market could absorb only so much short gold. Agree ?

Gold miners will be forced to close mines increasingly as the metal continues to drop. The supply of "new" gold will decrease and demand pressure will be supplied ( mainly ) by CB gold inventories until the gold dump programs cease.

Gold miners who can operate profitably at $250 gold prices will have a great opportunity to leverage "collaterized' gold loans.

While the focus shifts from the metal the gold miners with the best ( and worst ) prospects at $250 gold will realize renewed market interest - especially, in the late innings of the Paper Bull - possibly an October massacre the way things are shaping up ( a replay of 1987 ) .

In this regard I ask if you have a list of low cost producers in RSA that you may - once again - share with us ?

Thank you.


(Sat Jul 05 1997 10:02)
@..reason why HM is a short
To short HM ( or ABX ) is a no-brainer given that they are valued at premiums ( irrespective of forward hedge programs ) . The junior miners with economic reserves are more difficult shorts in this gold price regime as they are valued at significant discounts - for example, BGO/AZS Cerro Casale Project valuation ( for those who know the play ) .


(Sat Jul 05 1997 10:09)

I did not mean to brag in my last post. I worked hard for my pension and played by the rules. I now want to get out of my profession.

George Cole
(Sat Jul 05 1997 10:13)
Another possible reason for the gold war. Those at the top have got to know that a bear market in stocks cannot be far off. Naturally they want to limit the damage. The powers that be must also know that a severe bear market is bound to sharply hike investor interest in gold. They may be forcing it down so that the next gold bull will start from as low a level as possible. That way, they would have a better chance of keeping the yellow under $400 when the markets go to hell.

This strategy would be most effective if prices are pushed to the depths relatively briefly, so as not to trigger mass mine closures.

Paul Smith
(Sat Jul 05 1997 10:26)
Lee ( @Gold Bull ) :

Re: "If gold gets to $400 or better I can retire." Lee, I believe gold will do much better than that once it starts to move. I wish you every success !


(Sat Jul 05 1997 10:33)

Paul Smith: Thanks for the good wishes. It means a lot to hear that sentiment expressed here at Kitco. I wish you, and all here, good fortune.

(Sat Jul 05 1997 10:43)
Millions of ounces @ gone where ???
Puetz July 04 @ 23:34... Further, to gold reserves of CB's
*Gold As % of total Reserves*
1960-----44.7 %.....1980----80.3 %
1965-----38.0 %.....1985----72.4 %
1970-----17.8 %.....1990----24.2 %
1975-----41.2 %

1960-----92.1 %.....1980----90.9 %
1965-----91.1 %.....1985----72.8 %
1970-----77.6 %.....1990----58.3 %
1975-----89.3 %

1960-----20.2 %.....1980----73.4 %
1965-----18.8 %.....1985----31.0 %
1970-----14.9 %.....1990----15.8 %
1975-----25.9 %

1960-----94.1 %.....1980----75.8 %
1965-----88.4 %.....1985----60.2 %
1970-----54.8 %.....1990----52.3 %
1975-----62.4 %

1960-----75.6 %.....1980----35.0 %
1965-----75.4 %.....1985----32.6 %
1970-----49.3 %.....1990----16.9 %
1975-----39.1 %

Mike Sheller
(Sat Jul 05 1997 10:44)
I too have found ( thru much pain and suffering ) that a "layered" approach as you both call it is inevitably the best when moving into an asset play of any kind. Indeed the layers should be slimmer and more tentative, with snug stops, if the game is via futures. The Astrological Investor proposed to web visitors last summer and fall that expectations were for a weak spell ( a very severe astrological "tension aspect" we won't go into here ) in February/March of this year. The projection was for a late- summerish rally peak, and then renewed weakness into a bottom in the winter of 97/98. The recommendation all along was to accumulate bullion coins all during this weak spell, and to simply dollar cost average into spring of '98, when a clear indication of where the next bull would come from emerged. While I did not expect a break much below 340, and certainly did not predict any specific price ( Among other things, I'm an astrologer, NOT a fortuneteller ) current prices are harmonious with that strategy. While "financial astrology, as a form of technical analysis, is a growing field at present, MOST astrologers per se are not into materialism. Nor are they sophisticated or sufficiently scarred concerning the trading markets. That's why the recommendation has been for drawn out regular moderate purchases over a long period of time during which, hopefully, the conservative investor can join the game without being unusually vulnerable. We seem to be in the midst of that period. Actually, it was stated in an Astrological Investor post that Silver Maple leafs, accumulated regularly and diligently during this time window, would prove to the the "people's investment" of the early years of the next century. I still stick by that. At $5 face value Cdn, you can at least get a burger and some fries with your coin, no matter what. At this stage, some sort of tepid rally is likely in the making, unless of course, that ol' exogenous factor ( Max's brother ) emerges.

(Sat Jul 05 1997 10:49)

I would join you guys, but I wouldn't want to be at a site that would accept someone like me.

(Sat Jul 05 1997 11:02)
GEORGE S. COLE: Bull Stock Market Top. I have some thoughts on how to spot the top, even though we all agree no one can do it, we keep trying anyway. For the past several years "Bad News" is good news for stocks. The "Bad News", in stock nut theory, means that the Fed won't raise interest rates. The worse the "Bad News" the higher it goes. A giant corporate downsize somewhere was always good for a few points. Unemployment is up? Bad News? only if you are the guy out of work, stocks go up another few points. So where does it end? WHEN "BAD NEWS" IS PERCIEVED BY THE MARKETS AS "TRULY BAD NEWS" and stocks go DOWN instead of up. A better sign would be if stocks went up on the announcement and reversed later in the day after letting it soak in. I think that is as good a sign as any. I am still thinking about those money supply numbers from my earlier post. That is bad news for debtors in my opinion. I don't know if the market will react to it, probably not, but it seems that some folks who needed loans over the past two weeks didn't get them.

(Sat Jul 05 1997 11:05)
Barrons today ( bearly ) mentions gold twice on front page articles.
Describing the delicious conditions for stocks/bonds "It can't go on can it?" describes gold as "adding to the happy mix, gold on thursday dropped $7 ... Also, "Gold, who said Gold?" about gold as a laboratory contrarian play. Anybody counting bear ads/stories for gold? I know too time consuming!

(Sat Jul 05 1997 11:13)
Gold bottom -When everybody here looses their shirts,pants and socks.It is incredible with all the wisdom and knowledge in this group that so many can be so wrong most of the time.No thanks you can keep your socks.

(Sat Jul 05 1997 11:28)
Interesting column, Hashimoto's Golden Toothache, by John Tomkins,

(Sat Jul 05 1997 11:30)
Puetz: I saw your question as to the buyer of Australia's approximately $1.9 bullion worth of bullion. I posted this yesterday:
""Date: Fri Jul 04 1997 15:57
Donald: Your suggestion of a Japanese/Australian bonds for gold swap is quite plausible given the timing so soon after G-7 ( 8 ) and the Hashimoto remarks. I ( and others too including James Turk ) have thought they ( BOJ ) were trying to do a similar deal with the IMF which has publically committed to selling some gold to do "good works".
After overnight reflection I am thinking that the timing may well have been a godsend. They released the info while markets were open in London and New York but before a long weekend to allow it all to react and then to rest.
Perhaps more interesting are the rumors regarding the Soros campaign against the Thai baht AND the Soros interviews with the Australian Reserve Bank this past week. Was Soros there to prop up the $AD ahead of the gold announcement? ( He is said to have bought $AD heavily. ) Is he somehow involved in the gold/bond swap? Is Soros THE or A buyer of the gold?""

$1.9 Billion is a lot of money to me, nothing at all for the BOJ but a normal trading size for Soros. Since that posting I have reconfirmed the Soros "interview" with members of the RBA early last week. It is reported that he was short nearly $4 billion of $AD and has covered about one-third of that position. Furthermore I have been reminded by a well-connected source that Soros' entry into gold in 1989-90 for the $75 run up to about $430 was via Australia after he had gone long the $AD.
One way to put this together is to see Soros as the buyer in a situation in which he "graciously" accomodates the RBA and alleviates their fear of a slumping $AD ( which ties their hands on reducing rates ) by covering his short $AD position and delivers US Bills, Notes, and Bonds against the gold position. Since there are steady CB buyers for the gold position, Soros can unload it anytime he pleases after a rally.
The other and more intriguing possibility is that the Soros/RBA talks went badly last week. This scenario is that Soros did indeed buy the gold months ago and was attempting to pressure the RBA in some way with his short $AD position because of the fact that gold had underperformed. When RBA announced the gold sale on Thursday and the market did not rally, Soros unloaded the gold via Comex. The scuttlebutt from contacts at Comex is that the feeling was that it was one very large organization which dumped.

(Sat Jul 05 1997 11:37)

Poorboys: At some point the bulls will be right. A stopped clock is right eventually. Three Two Five is the right time to buy.

(Sat Jul 05 1997 11:38)
Market Maven report rings with logic & clarity. We have a Goldilocks Economy coexisting with a Vampire Financial State. Steve Puetz Letter:

(Sat Jul 05 1997 11:39)
6Pak: Thanks for those numbers. Could you direct me to the source? Email or here is fine. I have IMF numbers on millions of ounces held by each IMF member from 1975-93.

(Sat Jul 05 1997 11:42)
Here is a 20 year chart of gold with the Commodity Channel Index superimposed. The two indicators are the same. One fast ( pink ) and the other slow ( yellow ) . The small green arrow in the lower right is on the bar for 1/31/97. That was the lowest reading for the CCI in the past 20 years. Only 1988 was close at -458. ..... Present reading is in pink in the upper left...... A crossover ( weekly ) of this indicator has done a better job of picking tops and bottoms better than me - hardly noteworthy. .... Something different on a Saturday.

(Sat Jul 05 1997 12:02)
Oracle@japanese.SURVIVAL.Part - II (30 June 1997)
JAPAN BETWEEN A ROCK AND A HARD SPOT: Only Solution Is To Dump U.S. Treasuries and Buy GOLD! ( PART - II ) . Per global experts - Its Inevitable:

(Sat Jul 05 1997 12:04)
Canada's great neighbour can drive Gold back to $35.00 if that what it takes to make capitalism flourish for the next generation.Yes in Canada we depend on exports to the U.S as most of the emerging countries. Some people invest in the markets monthly for the future of their children.The 1929 scenario and all the doom and gloom wont bring back Gold to the shine of 1980 and if the markets collapse God help us all even the Goldbugs.

(Sat Jul 05 1997 12:12)
Earl: Thanks for a very interesting and bullish picture. It's rather obvious this is difinitly not the time to be SHORT GOLD. On the contrary it is for initiating positions for those who have none, and for increasing ones position for those still long.

(Sat Jul 05 1997 12:14)
So'ham: One thing is sure about the average cost of production ---nobody knows what it is. The 275 figure was quoted in late 1996 and seemed to get by without major criticism. Then about 4 months ago there was a report that the price was considerably higher-- $310 is a figure I recall. About the same time there was a Canadian report on several mines and the costs of Echo Bay and Pegasus were well above $400 an oz.

The problem involves the ability of many mines to switch from low to high grade ore as prices fluctuate, the presence or absence of other minerals in the ore that may be going up or down in price with or against the gold price and of course selling forward which has the effect of making current gold prices irrelevant to the mines profit.

A search of the Web about 6 months ago resulted in several sites that advertise documents that purport to tell the average cost at a cost of U$20 000 and up. I'm sticking to the 275 figure and watching for news of mines closeing with ore left in them. TVX closed a mine in Quebec about 2 months ago because it was loosing money. More to come I think.

George Cole
(Sat Jul 05 1997 12:22)
Market Top?
Donald: Your scenario for spotting a market top makes a lot of sense. But it is not te only credible scenario.

I place a lot of weight on the receding length of bull market phases. First phase 11/94-5/96 ( 18 months )
Second phase 7/96-3/97 ( 9 months )
Third phase 4/97-8/97 ( 4.5 months )

If this current phase lasts half as long as the previous phase just as the previous phase was half as long as phase 1, this market will peak in August.

The last time the market made a major blowoff August top was 1987.

(Sat Jul 05 1997 12:24)
vronsky- WHERE YOU BEEN?? I was about to believe you took the weekend OFF. I would give my left nuckel for a copy of Steve Puetz letter, I have
reloaded many times, HELP. Welcome back!!

All- recieved a sample copy of James Flanagan letter "Past Present Futures". He says that the indications now are for a low in the shares for October 1997, then an elplosive rally.

Tally Ho

ole 49r
(Sat Jul 05 1997 12:24)

Hi everyone. You got trouble. Right here in River City.

(Sat Jul 05 1997 12:26)
Here is a 20 year chart on silver as well. Unadjusted for inflation it's about where it was in '77.

(Sat Jul 05 1997 12:32)
ole 49r surprised your selling those slim pickings at these prices.

(Sat Jul 05 1997 12:32)
getting closer?
Bill Buckler...please comment on the recent ( last two weeks ) sudden increase on US Public could possibly be flactuation...but if not ( major tax intake season over? ) long, until they have to raise ceiling again?
Balance buget by 2002? Hogwash!

US Debt
(Sat Jul 05 1997 12:54)
obscuring problems
No offence intended...
...oh my, I've to go on diet, maybe by 2002! I can't keep on growing like this...I need to keep things under control ( interest rates ) but my system is still hungry ( need to sell more TBills to foreigners ) am I going to shed the unwanted ( devalue US$, oh its possible, have done it for the last 20 years ) oh look how ugly that model is ( gold ) ...isn't she ugly... ( throwing mud ) ) I'm so beautiful...look how beautiful I am? ( trying to convince herself? ) ...

(Sat Jul 05 1997 12:58)
Reply @ Source of Data
aurophile July 05 @ 11:39 : In reply to your request, to verify the
source, of the numbers that were posted by me.

Source: International Monetary Fund ( Table II ) [gold as % of total
Reserves ] is using market SDR valuations.

From:*THE GOLD BOOK* the Complete Investment Guide to Precious Metals.
FINANCIAL TIMES Revised for 1993, Featuring,the Death of the GOLDEN BEAR.

BY: Pierre Lassonde---is one of Canada's most astute gold investors.
As president of Franco-Nevada Mining Corporation Ltd, and sister company
Euro-Nevada, he oversees two of North America's most successful mining
firms. He is also president of the gold division of Beutel, Goodman & Co.
Ltd., mining analysts and advisors to mutual fund and pension managers.

Note: In addition to previous post
Gold As % of Total Reserves. ALL IMF COUNTRIES:
1960-----63.6 %.....1980----57.8 %
1965-----58.8 %.....1985----41.2 %
1970-----41.3 %.....1990----28.6 %
1975-----43.3 %

I hope, this has answered your inquiry, and is of assistance. Take care.

(Sat Jul 05 1997 12:58)
@"It's going to mean closures, it's going to mean shelving of expansion plans  and it's going to mean lower stock prices, in some cases,"
Saturday, July 5, 1997

Golds retreat further on bullion's freefall

Mining Reporter The Financial Post
Share prices of Canadian gold producers took another beating Friday, as the aftershock of a steep drop in the bullion price rattled investors for a second straight day.
Analysts said high-cost gold miners now face the difficult choice of operating money-losing mines or temporarily shutting them.
If closings do occur, they said, the stocks of their owner companies will undergo further pressure.
The Toronto Stock Exchange's gold and precious minerals index fell 3.34% yesterday, tumbling 271.33 points to 7855.20. That was on the heels of Thursday's 2.49% decline.
The biggest percentage losers Friday were: Pegasus Gold Inc. ( PGU/TSE ) , which fell 6.17%, or 50, to $7.60; Placer Dome Inc. ( PDG/TSE ) , down 5.76%, or $1.25, to $20.45; and Echo Bay Mines Ltd. ( ECO/TSE ) , down 5.3%, or 40, to $7.15.
Meanwhile, the price of gold settled deeper into its 12-year low. The closing price in London was US$324.45 an ounce, off 75 from the morning fix of US$325.20.
At one point during the day, the price dipped to US$322.75.
There was no trading in New York because of the Independence Day holiday.
Friday's London close was 25 higher than the Thursday closing cash price in New York of US$324.20.
On Thursday, the New York cash price plunged by US$7.10 on the surprise news Australia's central bank had sold 167 tonnes of gold in the past six months.
John Ing, president of Maison Placements Inc. in Toronto, said he thinks the gold price has touched a bottom, but that miners with cash production costs of more than US$250 an ounce are feeling the heat.
When other costs of doing business are added to cash costs at this level, Ing said, making money becomes difficult.
"It's going to mean closures, it's going to mean shelving of expansion plans  and it's going to mean lower stock prices, in some cases," he said.
Companies with production cash costs at US$250 or more an ounce in the first quarter included Getchell Gold Corp. ( GCO/TSE ) at US$462, Royal Oak Mines Inc. ( RYO/TSE ) at US$372, Pegasus Gold Inc. ( PGU/TSE ) at US$297, Kinross Gold Corp. ( K/TSE ) at US$311, Echo Bay at US$267 and Cambior Inc. ( CBJ/TSE ) at US$260.
Some high-cost producers may be able to avoid mine shutdowns through aggressive forward selling of gold, which usually brings a higher price.
Pegasus and Cambior, for instance, reported "realized" gold prices of US$460 and US$452 an ounce, respectively, in the first quarter.

(Sat Jul 05 1997 13:01)
I'm guessing that the current environment has forced a drastic change in hedging stratigies for the majors and that the strategies imployed will become less uniform than they have been in the recent past. The majors like Barrick are hedged for 2 years at above $400, right? Are they presently selling forward at lower prices or has hedging been suspended? In two years, will all producers be unhedged? Anyone have insight?

(Sat Jul 05 1997 13:13)

On "Sat Jul 05 1997 12:12" Vronsky said:

"Thanks for a very interesting and bullish picture. It's rather obvious this is definitely not the time to be SHORT GOLD. On the contrary it is for initiating positions for those who have none, and for increasing ones position for those still long."

Interesting Vronsky never, and I mean never, thinks gold will go down further..
And is always encouraging adding to positions.. I would love to go back and try to
figure out how much in the hole I would be if I added just 1% of my portfolio
with each of his "now is the time to add to position" statements..

Vronsky, one of these days youll be right. But please dont think yourself a
genius when this happens.. If one makes the same prediction day after day
some "year" it will be true.. But 1000 bad calls does not make 1 right call acceptable.
Be kind to us all and suggest that this gold bear is getting just as out of control
as the stock bull, and it is very dangerous ( financially ) to not be cautious either

I would love to know how many good people youve helped loose their money..

Im not trying to be hurtful and I enjoy your comments but your almost fanatical
about gold and this is dangerous..

(Sat Jul 05 1997 13:16)
Cedar: Many companies though not all have already sold this year's production. One company I follow was very successful and has sold its entire 1997 production at 395 per oz. further they have shorted many thousands of ounces of option premium at higher prices so they are well taken care of for this year. The company is Royal Oak Mines. The spokesman told me that they would have no hedges beginning in 1998 unless there is some sort of gold rally. This is short term problematical but would als make the company a purer gold play. He said on some rallies of course they would put on some more positions but generally not more than 15% of mineable reserves. The company has been a high cost producer but with the completion of the kemess project their cash cost of production drop to about 240 from 340. It is the only gold company I know trading below book. Its capitalization to mineable reserves is about 33 per oz where for normal midsize producers the ratio is about 75-100 per oz.

That there have been difficulties with the govt and indians ( both now resolved ) over kemess funding and development along with this being their first self created project could account for the undervaluation.

(Sat Jul 05 1997 13:18)
OZ: Is anyone there awake yet?. Paul Revere has been reincarnated and rides horseback at midnight for the RBA. His new cry?...The bullion is coming!, the bullion is coming!

(Sat Jul 05 1997 13:18)
@Why Mine ?
A thought: If a large Gold miner like Barrick is hedged for 2 years at 430./ounce and the current spot price falls to 300./ounce, why would they continue to operate their mines at 340./ounce, when they can buy the same Gold at 300. and make an extra 40. per ounce.
Yes they would like not to have to mothball their mines, but the bottom line is maximum profit.
It's hard to imagine that Gold could go much below 300. as some are suggesting, in light of the actual production costs to mine Gold.
Panick may do the trick for a while though.

(Sat Jul 05 1997 13:19)
@heading down
O/49er- Congratulations. You called this move in the bullion well in advance. You have also said that the next stop is US$265. My question: Do we get a suckers rally in here before a further drop, or are we going straight down? Your opinion appreciated.

ole 49r
(Sat Jul 05 1997 13:20)

Poorboys: I see your grammer hasn't improved. "Your" is a possessive pronoun. You meant to say "You're", a contraction of "you are".

(Sat Jul 05 1997 13:21)
OH-OH, Not again?
Communications glitch hampers Mars rover

Latest developments:

Engineers 'confident' Landing went 'beyond expectations'

July 5, 1997
Web posted at: 9:39 a.m. EDT ( 1339 GMT )

PASADENA, California ( CNN ) -- NASA scientists scrambled Saturday to fix a communications problem with Pathfinder's star performer: the little rover that is to journey onto the Martian surface.

If the problem is not corrected, engineers may not be able to drive the six-wheeled Sojourner on Mars via remote control, rover manager Jacob Matijevic said.

(Sat Jul 05 1997 13:26)
@New England
I sense panic in the gold industry. Is it possible that these guys could hedge themselves so aggressively that they will get blown out of the water on the someday big and sudden up move in gold. 260=280 would create unbeliveable panic and thus could cause panic overhedging. Thoughts??

(Sat Jul 05 1997 13:27)

Sorry about this week. I promise to make it up to you next week. Scouts Honor. ( Uplink Terminated )

(Sat Jul 05 1997 13:29)
ROEBEAR: Did you catch the piece at the bottom of the Michael Santoli Commodities Corner? He is using the 24oz to buy the Dow theme I have been posting. Is he a lurker or contributor here, or did he figure it out himself?

(Sat Jul 05 1997 13:46)
Donald: Re the DOW per oz in Barrons Commodity Corner. I just caught it. Seems there is a lot of mention of golds $7 drop in Barrons this week. You have the credit IMO, for that DOW/oz ratio, I read it in your posts first! What name will you give it? Donalds Ratio?

(Sat Jul 05 1997 13:48)
DOW per oz = oz per DOW. Wishful thinking I guess.

John Disney
(Sat Jul 05 1997 13:59)
For bob/don
1. regarding low cost rsa producers - first the
rsa mines are only beginning to adopt International
Accounting Standards for reporting their costs. The
effect of their previous reporting from dawn of time
has been to OVER STATE their costs relative to other
producers. The costs reported by RSA mines include
everything except Capex. This has led to the largely
myth-like generality that the mines here are high cost
and the mines elsewhere are low cost. This is similar
to the entrenched myth that the society here may
disintegrate at any moment ( this myth predates the
first Boer War and I think was first planted by the
Anglican Church as an arm of British foreign policy ) .
2 Ill give you the low cost producers BUT if you think
gold will be sold off to 250 why do you care?? Their
profits and share values will shrink too. They will
simple manage to stay alive and suffer while the others
die quietly.
3. All this talk of 250 and Scott knows a Frenchman
who talks of 100 to 150 long term bothers me. Having
made the numbers on the economics of the Aussie sale,
what impresses me is that it is only favorable
and BELOW 325 REGARDLESS of whether YOU sell or NOT.
Does somebody really know something ?? Some Frenchman
to boot ??
4. Suppose Scotts Frenchman knows that the CBs plan
to continue selling and to drive gold down until
exploration STOPS and production slows to say half
the present level - at 100/150 it will stop completely
as Im sure that NO mine can cover TOTAL per once costs
at anything near that.
5. I wish Scott could check where this French info
comes from. But I cant see buying Australian producers
as they do tend toward the high cost direction even
WITH IA standards. The test of a mining companys
costs is the gold price level at which they stop
making money. I dont believe most of the costs the
companies provide.
6. The dumps in Europe were expected and are either
associated with meeting EMU criteria OR perhaps this
is a cover story and it really is a program
to rely on German and French gold reserves with the
more peripheral countries running their gold reserves
down as the Euro slowly comes in.
7. The Aussie sale is of course a surprise. But it
is a parallel to what the Canadians did. Australians I
find like to compare themselves to Canada ( large country/
small population ) and usually like doing what Canadians
do only a little later.
8. On the currency "blocks" - I see only US and Euro
blocks - I see no activity toward a yen block. On that
point, you say that the Japanese have sold most of their
gold over the last 10 years. Is that true?? I didnt
think so. I thought they always had low reserves relative
to $ holdings - Do you have any data on Japanese Gold
holdings over time?? Few Asian countries like Taiwan
China or India seem interested in reducing holdings.
What about South Korea and Singapore - Any data??
9. Im fascinated with Scott's Frenchman and the
130 $ gold. Whats the story Scott - Why so low - Why
go even LOWER than the lowest cost mine?? Are we
sowing salt in the ground so gold never grows again??
Why not make it illegal not only for a non oriental to
OWN gold but even to say the dreaded word.
10 RSA lowcost producers - Numbers are maybe at least
10 % high on a comparable basis with non RSA mines.
Dries - 260 or less - Earns $.27/share
Joel - 274 " " - Loses -.02/share
Buffels - 260 " " - Earns $ 1.49/share
Beatrix - 225 " " - Earns $ 0.38/share

Many other RSA mines with costs in the $ 300 region
have good earnings as their costs are overstated.

11. Of the Aussies

Aurora - 211$ - Earns $.07/share
Delta - 252 - Earns 0.33/share
Great Central - 207 - Earns 0.11/share
Normandy - 239 - But only earns .02/share

12 Of the Yanks

Battle Mountain - 231 and LOSES $.33/share
Newmont - 211 - earns $.95/share
Homestake - 245 - Earns $.15/share

13 Canadians
Barrick - 197 - Earns $.40/share
Teck - 202 - Earns $ 1.39/share
Kinross - 259 - Earns $ 0.05/share ( moregold shows 311$ cost !! )
Cambior - 255 - Earns $ 0.08/share
Many others show gorgeous costs and lose money.
I assume de Guzman's relatives are somewhere in
their accounting departments .

All the info was picked from the Mining Journal
Gold service.

(Sat Jul 05 1997 14:06)

I hear a many say that gold cannot go below the price of
production.. This is ludicrous.. Of course it can. If there
is more product than there is demand for the product then
the price will go down, irregardless of the fact that many
producing the product ( commodity ) will fail.. This is the
simple law of supply and demand and will hold true for
gold also. If someone said this about autos, computers,
coffee, lumber, etc. many would agree Well, gold can
be exactly the same. The price of production has no bearing
if there is no demand.

The Dow average/ounce gold theory just as ludicrous.. I
dont believe it! What the heck difference does it make??
Remember supply demand.. There "is" more supply than there
"is" demand Simple!

(Sat Jul 05 1997 14:14)
thanks 6pak/// Both Randall Forsyth and Gene Epstein have interesting articles in Barrons today on "what happened to inflation"? ( Both also quote Steve Roach of Morgan Stanley. ) Paul McCulley of UBS has recommended the spread between Fed Funds rate and the yield on the 2 year note as a leading indicator of stock market direction. ( This is basically a newer variation on the old TED spread concept of complacency versus fear amongst investors. ) McCulley points out that when the spread widened from 50 bp to over 100 in March, the stock market fell 10%. As of Thursday the spread was 41.5 bp. "That slim spread between two-year notes and fed funds implies the collapse of all risk premiums,m and the virtual elimination of any possibility of Fed tightening in our also means that Fed Chairman Alan Greenspan has led us to a recession-free promised land." Nevertheless McCulley believes that "there is a difference between taming and repealing the business cycle."

I find this interpretation of the 2year-ff spread most interesting since it provides an alternative explanation for the significance of gold's plunge since February 1996. Since the 1970's we have been accustomed to seeing gold's major ups and downs as harbingers of inflation or disinflation. "Gold leads" is a favorite nostrum. Well, if gold is leading since 1996, we're going toward a deflationary collapse a la Prechter and most of the internet "crashistes". Put within the context of McCulley's reading of the rate spread, the bear in gold simply reflects the "irrational exuberance" of stock market investors that all is well with the world. The stock market is not wishing for deflation by any means. It is looking for steady growth without inflation. Therefore bonds are not perhaps the BEST investment within that environment, but they are safe.

As has been suggested by others, the safety of the bond may be the reason ( or the "outcome" depending upon whether you are a "conspiracist" or a "market speaks" devotee ) for gold's decline. So what? If both the bond's and gold's prospects are dependent upon the continued success of stocks, then inflation is the wrong microscope to use. If gold is going down because of stock market confidence ( along with that rate spread ) then the only factor worthy of noting is the stock market price. As long as gold and the spread are low, the stock market will not top. As soon as the market does top, gold and interest rates will go up. ( The scenario in which they both go up together is key to my long wave analysis, as from 1946 to 1980. )

McCulley's feeling is that not only has the stock market discounted all good news for the next decade but so has the rate spread. And I would maintain that gold has too. But this is not to say that the manias cannot continue for a while. When people are mortgaging their homes to buy mutual funds and NJ borrows at 7% to fund its pension liabilities ( stocks ) , we are clearly into the tulip mania/bubble phase.
This is why I would dearly love to know whether Soros has made a bonds for gold trade, effectively. If it is merely a Central Bank buying all the gold being sold by miners and other CB's, then this is just a diversification program of no great short term significance. But if some very successful hedge funds are scaling into gold in a big way, we have the makings of something very meaningful.

Paul Smith
(Sat Jul 05 1997 14:15)
In todays Globe & Mail Business Section titled "Where the Action is" The reporter, Stephen Northfield states..."Gold stocks: The group slipped 5.5 % this week, bringing the year-to-date loss to 30.5%. Bullion plunged to a 12 year low at one point this week after Australia announced that it had sold a load of the junk over the past six months".

JUNK he called it ! It's amazing how trends cause writers to jump on the bandwagon and say such things. Gold is out, equities are in. I wonder for how long ?


(Sat Jul 05 1997 14:17)
NotAGoldbug: Could I ask you to back up your statement that supply is exceeding demand with some figures or data or are you basing this statement on price action only?

(Sat Jul 05 1997 14:19)
@ The Public Library
Current data and charts showing yesterday's action in Canada is available at
For the TSE Gold and Silver index type in ^tgl
For individual stocks try for example:
or, etc.

You might want "detailed" info rather than just "basic" so click on the down arrow next to 'basic" to allow you to use that option.
Available chart with each index and stock can be adjusted for different time periods. Percentage moves also given. Have fun.

(Sat Jul 05 1997 14:24)
NotaGoldbug: You are, of course, correct that gold can fall below the cost of production and stay there for some time. But you are incorrect to compare this to computers or autos. No one sells the latter short. No one ( except the stock market... ) is selling auto production of 1999 forward. When prices drop below the cost of production due to lack of demand, auto makers do not produce more of it. But short sellers and forward sellers ( the same thing ) can and do continue to sell. The result is that auto prices may rise very slowly and after a long time as market demand slowly grows. But in a market driven by massive short selling there is already a future market which can be comfortably sized: all those short sellers are going to have to buy one day. And if the price remains below the price of production very long, they are going to be subject to a major squeeze.

(Sat Jul 05 1997 14:27)
Ole 49r: Your grammar may be impeccable, but you're no whiz on spelling.

(Sat Jul 05 1997 14:27)

NotaGoldbug @ 14:06--Supply and demand indeed. If gold were not a political football, it would be fairly valued at $450-$480. More to the point, the Dollar is terribly overvalued at $325 per ounce of gold. It is more realistic that an ounce should fetch $400.

(Sat Jul 05 1997 14:38)

My analysis is based on technical patterns. This, I believe, is the purest form
of analysis. Yes, sometimes technical patterns can be manipulated by strong
hands but I try not to get to worried by this. I play along with what ever is
happening.. Why not.. I do believe were all here to make money.. As with gold
I enjoy the almost religious following it brings along.. It is the purest "emotional"
investment I know.

I don't believe, even in the remotest sense, that gold will become a currency
again. I love my computer, credit card ( by the way, always paid in full ) and
all of technology.. It amazes me that so many intellectuals also rejoice in the
Internet but think that we will return to a currency that weighs 1 oz per $295.00.. :D
Why? They see governments ruin currencies over and over again. But as with
Germany ( twice in a century ) They run back to a currency that is "easy" to use.

Gold has lost, temporarily, its appeal..

(Sat Jul 05 1997 14:39)
Telecaster I am sure that was not ole 49r just another handle stealer.

(Sat Jul 05 1997 14:40)
Auric said: Dollar is terribly overvalued at $325 per ounce of gold. It is more realistic that an ounce should fetch $400.

Your opinion, not the worlds!

(Sat Jul 05 1997 14:44)
To P.Smith;Aurophile;NotaGoldbug;JohnDisney;BT;Milhouse

Paul Smith: One man's junk is another man's treasure eh!

Aurophile: Outstanding post! Wish I had as much time as you to read it all. Glad you're there and not charging for the time expended though ( :- )

NotaGoldbug: Absolutely correct. If they overproduce cars, they shut down the line till the inventory gets back into acceptable levels. Makes sence to me.

John Disney: Point 7 ... Aussie's usually do what Canadians do only later....Hope not, My daughter just got back from an Air Cadets training camp in Quebec ( French part of Canada ) and on Canada Day, they purposfully flew the Canadain flag upside down in disrespect! This country is splitting apart sooner than anyone thinks!

BIG TRADER: Now I know you're not a Canadian! "Scouts honor"? It's "Honour" in Canada! Big Trader is an American!

MILHOUSE: I was re-reading you post of April 4, 1997 @ 23:38 today. I placed it on my wall since it seemed so outlandish back then. HELL OF A CALL SIR! In summary you said:
If Gold closed weekly above 370 then a low of gold to the 325~334 area should hold in a further decline and SILVER, if unable to close on a weekly basis above 5.388 by the end of April then another decline to new lows in June/July to 4.25~4.50 by mid year. Now if that's not worthy of the KING OF KITCO AWARD, I don't know what is! Dates and Numbers and projected results all in one post that has come true in-side a time limit. Excellent!


(Sat Jul 05 1997 14:53)

I do love your comments, of all the participants in this site your just about my
the most real...

As to the short covering. I have almost always found that short covering at
bottoms a non event.. It is "always" fanticized about but rarely bounces as high as
was anticipated. At tops, especially in this market, it is more interesting.. Causing
the stock/commodity to propell byond reasonable limits..

I do not believe that short covering will be anything other than a good trade. If
the fundimentals of gold, or psychology, doesnt change the metal will continue

(Sat Jul 05 1997 14:53)
Re-14:40 post

NotaGoldbug-True. An ounce fetches $325 right now. That is the world's agreed upon price. Gold is as undervalued now as the Dow was in the Summer of 1982. Do you reject the idea of $450 gold by 1999?

(Sat Jul 05 1997 14:54)
John Disney: Re your 13:59 that gold price of $US 127 to 135 caught my attention also. That was Steve - Perth post at 08:16 "French contacts..still sticking to US$127 to US$135 an oz for Gold LONG TERM. ( Poss by Sept. ) Will be $300 in a fortnight..." Steve, was that TV show The French Connection?

(Sat Jul 05 1997 14:58)
To Aurophile:


I had just posted my agreement with NotaGOldbug about the supply demand thoughts and went back and there you were saying I was wrong! Well actually, ( :- ) you said he was incorrect and therefore by extension, I was wrong. NOT! ( :- ) You're right of course about the car companies not being shorted like the Gold market is at the moment. The problem is for me, that the two markets are totally separate. From the point of view of the creators ( companies ) of cars/gold etc. if there is too much output and nobodies buying, then the production line stops until the market catches up with the goods already produced. Of course they can't "short" the items already produced since that would entail taking back already produced goods from the market and would be most uneconomical. They also cann;t reduce production below zero so that also would back you feelings of non-shorting the items. When you refer to shorting though, we're talking about a different area. We're talking about the feelings of people about the future of a company. Sure we can sell "Ford" short ( and sometimes when my Taurus stops working, I will! ) and we can also sell Barrick Gold short of course. But that still doesn't eliminate the necessary distinction between the items price of conceivement and the wantings of individuals taking a flier in the stock market re shorts. Two different worlds I would venture to say. Is it possible we're both right?


(Sat Jul 05 1997 14:59)
EARL and ALL......On July 5th, 1977, silver closed at US$4.40 and gold closed at US$141.30...........

(Sat Jul 05 1997 14:59)


Do I reject the idea of gold at $450.00 by 1999?? That is so far off for my
trading techniques that I feel your just fishing for a prediction..

(Sat Jul 05 1997 15:09)
Cost of Production is IRRELEVANT
The supply of gold is always increasing as the commodity is mined.
The yearly production only increase the world supply. Gold is never
"consumed" such as is oil or corn. Therefore looking at the
cost of production is irrelevant. We saw this in the mid part
of this century. It is mostly the change in demand for gold that will
determine wide price changes. We are now witnessing a shift
in the demand curve for gold as CB have reduced the amount of
gold the wish to own.

Until the demand curve shifts in the other direction we will
not see a meaning increase in the price of gold.

(Sat Jul 05 1997 15:13)

NotaGoldbug--My time horizon is 3 to 5 years. I am using this time to accumulate. Your time horizon seems to be shorter term You may be right.

(Sat Jul 05 1997 15:18)
Roebear: No. Lets call it the "Rip Van Winkle Ratio" You set it up, go to sleep for 17 years, take profits and reverse it, then sleep for another 17 etc. Re the French Connection and US$127. If you think a lot of gold came out of Australia this week, how much do you think would come out of French mattresses before we hit that price?

John Disney
(Sat Jul 05 1997 15:30)
For Steve
Sorry I mixed you up with scott. Can you expand on the little story
about the frenchman that says gold goes to 300 in a fortnight and 130 by
September ( long term???- 3 months is long term ?? ) - please tell me
more - who is this frenchman?? Was his name Bernatz ?? was he trying to
sell a funny machine that you put dirt in ??

(Sat Jul 05 1997 15:31)
NotaGoldbug: Thanks for the comment. Coming from you who predicted this outcome long, long ago, it is a compliment indeed. My hat's off to you!

(Sat Jul 05 1997 15:36)
Donald, I do not know about French mattresses, but mine will be too lumpy to sleep on at US$127 gold!

(Sat Jul 05 1997 15:37)
There something I would dearly love to know about some
the honest participants of this site.. I believe many holding
gold or gold related investments are not just a bit uneasy
about the overall action in this commodity over the past
year.. Especially in the light of the stock market averages..

Now, many are predicting a melt down in the overall market
and use this as justification for their gold holdings. I believe
that others, even as new as they are to the stock market, do
anticipate 10 to 20 percent corrections and "will" stay the
course when these occur. This is only speculation on my

I also believe the gold and gold related investment holders
are at "much" more risk of bailing than the others in the major
equity markets.. They have been the most battered while watching
others make fortunes. This is very depressing psychologically.
Gold is getting the four letter word status among many honest holders..

I ask you "long holders"; dont you feel this is getting the best of
you? Im only trying to be honest.. Gold has been a pitiful investment.

Just as many look for a huge bail out in the major equity markets I
believe this could be happening to the gold market. Kind of weird
to be happening to the soothsayers of doom

This will be an opportunity for some..

(Sat Jul 05 1997 15:39)
Panic! Blood in the Streets! Capitulation! Serious talk of $150! $250 a virtual certainty! Didn't Baron Rothschild say fortunes can be made in times like this by those who keep a calm head and their eye on the ball.

(Sat Jul 05 1997 15:43)
I predict gold at $200/oz. and $500/oz. I will be correct on both accounts in my lifetime - guaranteed! It's that easy to make predictions!!! Everybody is right at some point in time.

(Sat Jul 05 1997 15:47)
OLD GOLD: Yes he said that but he was talking about the S&P, not gold.

(Sat Jul 05 1997 15:48)
The Fed and Greenspan use the price of gold as an inflation indicator.
Stteve Puetz says deflation is already here. Perhaps the declining price of gold indicated severe deflation on the horizon and stock market correction-crash soon.

(Sat Jul 05 1997 15:52)

To Old Gold:

Baron Rothschild also said "I never buy bottoms and I never sell tops"

(Sat Jul 05 1997 15:53)
To all "supply-siders": While most gold mined is still available in coin or bullion, amounts lost to jewelry/electronics are real and would not be available under what $500 -$700? On the demand side, what about population growth. Population has doubled has gold supply? When everyone gets rich on stocks what do you expect them to do with all their money?
!: ) )

(Sat Jul 05 1997 15:56)
Fair Dinkum

NotaGoldbug-A gentlemen's wager? I say Spot Gold hits $450 or better between now and December 31, 1998. If I am wrong my gain will be miniscule. If correct, the gain will be most rewarding. I jumped in while the Aussies and Dutch were selling. I took the plunge.

(Sat Jul 05 1997 15:57)

To Roebear:

Buy platinum.. ( I did, for my wives 25th wedding anniversary ring.. )

George S. Cole
(Sat Jul 05 1997 15:59)
gold and inflation
Chuck: I don't think the Fed uses gold as a major inflation indicator anymore. Unit labor costs much more important. They are more aware than most of the relentelss CB attack which has driven it down. Some influential economists such as Larry Kudlow and ex-governor Wayne Angell still harp about the gold price being the ultimate inflation indicator. But they have few followers in the financial community.

(Sat Jul 05 1997 16:03)
NotaGoldbug, Our 25th is coming up early 97 and I might do that. Looks like I shoulda got it early though !: ) ) But I didn't know about Shibui!

(Sat Jul 05 1997 16:07)
Bailing Out
NOTAGOLDBUG: I think you are right that many long-term gold holders will be bailing out in the near future. Probably just before the next gold bull begins.

(Sat Jul 05 1997 16:07)
97 = 98! Time to go! ( If I'd missed that date it would've been worse than shorting PL! ) BBL

(Sat Jul 05 1997 16:07)
To George S. Cole:

Agreed.. The myth that gold is an inflation indicator will live on
forever.. How it got started and how it lives on I just cannot
fathom.. Of course, I do not give much merit to intra market analysis
as a whole.. Gold, to me, stands on its own..


Actually, it is  platinum.. ( I fudged a little ) .. :D.. But honestly, gold
and platinum is a unusually attractive combination. Very 90s
( oh, and, congratulations!! Were a small community )

(Sat Jul 05 1997 16:07)

Golds increasing supply? What about the increasing supply of stocks, bonds, currency? Gold is going down not because of increasing supply, but because no one wants it. We are in a bear mrkt until we aren't. Since the OZ decided to swap their gold to someone else; you can look at the transaction two ways, bullish or bearish. It would be interesting to see who or what the counter party was in that transaction. Japan, maybe? Also, there is usually one big winner in a poker game and as the old saying goes,"if you are in a poker game and can't figure out who the patsy is; it's you!

(Sat Jul 05 1997 16:10)
South Africa: Golds fall sharply


Shares in Johannesburg rattled lower for the third session running, with
sentiment mostly depressed by a further severe shakeout for golds in
reaction to the slide in the bullion price to a 12-year low.

The golds index tumbled almost 4 per cent after bullion crashed lower
following a steep decline overnight in New York.

Dries slipped R1.15 to R30 and Western Areas fell 50 cents to R31.5.
Vaal Reefs shed R7.50 at R221 and Eastvaal touched R4.18 before
closing off 34 cents at R4.46. At the close, the golds index was off 33.1 at

The upsets on the golds pitches cast a deep cloud over the rest of the
market. "It's been a black day in spite of the lack of volume. There's been
no end of profit-taking in golds," said one broker.

Industrials came off 27.9 to 8,801.9 and the all-share index ended 35.2
lower at 7,368. Norwich Holdings was the day's most active stock, adding
10 cents to R8.40.

(Sat Jul 05 1997 16:11)
Old Gold, you said:

"NOTAGOLDBUG: I think you are right that many long-term gold holders will be bailing out in the near future. Probably just before the next gold bull begins"

Yes, this has been my point all along.. " The many will parish while the few reap
the spoils.."

(Sat Jul 05 1997 16:12)
Cost of Production
The price of gold is a function of many variables but certainly the cost of production is one of them. Costs are very relevant to the gold producer and anyone investing in gold stocks. Company operating costs may not impact demand but will ultimately impact supply. Shifts in the supply curve can impact prices just as much as shifts in demand.

To So'ham 07:33 - I think the confusion over different reported statistics is the difference between cash operating costs and total operating costs.

For example, Q1'97 average cash operating costs for large and mid cap North American producers was US$234. Large caps averaged US$224 and mid caps averaged US$278.

When non cash items such as depreciation, amortization, and reclamation costs are added in the average increases to US$309.

My earlier post regarding average costs of US$317 was a world statistic, not just North American producers.

On a different note, a thank you to all for some very insightful contributions.

(Sat Jul 05 1997 16:16)
NotaGoldbug: I think it is a fair question whether those holding gold and gold stocks are near the panic phase. Bullion is down 22% from the February 1996 top and the XAU is down 39%. I don't imagine that everyone bought everything they own at the top, but assuming a diversified holding ( i.e., not all Bre-X or all Bema ) probably a lot of people are close to the 20% loss level which you mention as what most stock market investors would suffer without panicking. Another factor in this is what percentage of net worth is in gold-related investments. Is it a small portion for diversification or is it a major part? If it's a large part, which could be true for many here, the opportunity cost of seeing the stock market UP 50% since the start of 1996 while their gold investments are down 20%+ could be the factor which is causing or could cause panic. "Jeez, I missed the whole rise in stocks which is continuing and gold is STILL going down. Get me OUT!!!!!!!!!!" This could very well happen on Monday. Or maybe happened on Thursday, although that was said to have been one or a very few sellers on Comex. What do you think?

(Sat Jul 05 1997 16:20)
NotaGoldbug, small community indeed! I hold my gold well, she's got gold hair, but we're both getting a bit of that silver too! Speaking of which, I really have to go now but would be interested in your opinion of silver 1-3 months? I believe it will hold better than gold, smaller supply no CB's. BBL

(Sat Jul 05 1997 16:20)
Population Increase
Roebear and others: The increase in population does not
necessarily mean an increase in demand for gold.
The general population consumes very
little gold and has little taste to horde gold at this time. I
have suggested the demand curve has shifted to lower levels as
the Central Banks has decided to hold less gold at these prices...

I would also like to suggest that producers have also shifted the
supply curve to output more gold at current prices. This is
accomplished by technology. There cost of production has decreased.
Never before have I seen so many quartly reports saying they will
be increasing production. Look at all the gold mining companies
being traded that do not even product any gold.

I see no meaningful or lasting increase in price...

Comments Please....

(Sat Jul 05 1997 16:21)
NotaGoldbug 15:37 : YOur question is timely - I was thinking about this
last night. My personal feelings are that I hope I never ever need to
exchange my gold ( stuff ) to live. Ever! I believe the demand for my skills
are inversely related to the price of gold. I can maintain an extremely
high standard of living as long as $$ keeps flowing into the R&D budgets.
The only time in my life that the $$ has stopped flowing was around 1980.

Yes, I've missed out on Microsoft and Intel - I knew about them long
before they were household names. I sleep well every night knowing the
downside risk to my quality of life is very little. I will keep adding
to my hoard of PMs and I will keep speculating in the future markets and
I will keep on consulting on the cutting edge of technology and I will
keep on golfing the lovely golf courses of Scotsdale and Scotland.
Depressed? No not today.

(Sat Jul 05 1997 16:23)
George Cole: I don't know if you saw my 1414 post, but McCullin" ( UBS ) remarks in Randall Forsyth's column about the two-year note/ fed funds spread prove to my satisfaction that that spread AND gold are measures of confidence ( or lack thereof ) in the stock market than anything else.

(Sat Jul 05 1997 16:23)
add on:

If we were in a bull mrkt, the spin would have been, "xyz central bank ( s ) bought gold 167 tons of Oz gold during the last 6 months."

(Sat Jul 05 1997 16:26)
@..better late than never...the Gold Institute steps up to bat
What ?! Somemore good news .... lookout below !

(Sat Jul 05 1997 16:32)

nomercy: Thank you for the fine article by Tomkins. Thanx; Bart for this great site, and thank god for all the fine posts over the past two days.

(Sat Jul 05 1997 16:33)
DANA: A very helpful post. I am going to save that one.

(Sat Jul 05 1997 16:40)
@...cost is relevant and jewellry supply is not so relevant (yet)
The cost of gold production is important as it offer the gold miner an opportunity cost to make or buy gold. The unknown forces that prevail will turn gold prices around when the producers decide to close mines and buy physical gold -- and then, brothers and sisters, the shorts will be caught crying all the way to the bank -- off the remainder few CB's who haven't blown their lodes.

The cummulative supply of gold in jewellry will not enter the primary market unless ( of course ) the price of gold rises sufficiently to encourage owners to sell their gold to refiners -- would bart really want to buy jewellry to refine given the composite mix of material found in ornamental metals ?

The contrarian indicators of massive press doom and gloom has just been announced. Relief may be on the way next week....wait and see.


(Sat Jul 05 1997 16:41)
MJ-12@The Limo

Anyone seen a couple of "crash test dummies"? Heh heh.

(Sat Jul 05 1997 16:41)

You ask me what I think.. Honestly, I do not know. But given further weakness in
gold and strength in the market averages ( or just sideways action in the major averages ) gold holders will get more and more discouraged.. You mentioned that
many are down from the 96 top and used this as your averaged in point.. Well my
assumption would go a step further.. many have held gold much longer and even
if its only a portion of their portfolio have ridden this up and down and up and
down with more downs than ups.. These are the ones Im worried about.. The
"long" term weak longs.. The Central banks are one of these..

I may sound arrogant to many but I do not "yet" know how to predict anything
I trade with my technical indicators and sometimes I get bruised and sometimes
I do quite well..

I do want to add and have been thinking on this for a while.. I sometimes question
Vronsky. And, I believe, this is a short term good thing.. But like in Jesus time
( and buy the way Im not deeply religious ) he spoke of good honest things but was eventually shunned.. Even by his most avid followers.. I believe the "essence" of what
Vronsky says is true.. His timing may be off Or maybe the truth is just not what
the masses what to hear or believe

(Sat Jul 05 1997 16:53)
Re: NotaGoldbug, gold acquisition
I believe vronsky is refering to the cash purchases of gold. Gold was an excellent long term cash buy at 360 it is here at 325 and will be at 300. I have been buying for cash all the way down and expect to be quite pleased with my average cost in three years or so. When the cabal driving down the price of gold have finished their accumulation of the weak hands gold, ( by the looks of this site they have done an excellent propaganda job ) perhaps about the same time paper becomes suspect, then gold will also be a very good short term speculation. Dont be afraid for those buying gold here. Fear instead for those who have most of their wealth in a form that weighs less than one gram. After all this is the biggest con game in the history of the world.

(Sat Jul 05 1997 16:56)
@gold is dead, demand/supply, etc
Somebody please help me here. I am just trying to apply some logic to
this talk about "supply demand .. gold is dead ... has no value anymore
.. etc. ) The following numbers may not be accurate to the last penny
but I guess they tell me something.
AU dumps 160 ton of gold - isnt it about 6% of world production?
Somebody spends $1.5 trillion to buy it.
Gold price drops by about 2%.
If there is no demand and gold has no value anymore how come there
is a buyer? How come somebody is willing to waste $1.5 trillion for
a worthless "commodity" which is heading South? How come price of gold
did not drop by 10 %?!

Looks like major gold holders - CBs dumped in recen years a significant
part of their gold holding but price of gold is pretty steady - holding
in $300 price range - no decline in 30-50% range?

If demand/supply law applied just like for other product the picture
should be different.

On the other hand Intel, Dell, MSFT, etc. announce that they may not
reach a projected revenues and price of stock drops by 10 - 20% a couple
of weeks! If the market for their product decreased by 6% you would see
the price of their stock decreasing at least by 30%.

As far as I am concerned gold is not doing so bad in "nobody wants you
anymore" market.
Gold still represents much more than commodity driven by market

JMHO - Miro

George S. Cole
(Sat Jul 05 1997 17:00)
Aurophile: Agree you you absolutely that confidence in the stock maket is VERY HIGH and rising right now. A key factor behind gold's miserable performance. Supports my argument that gold will remain in the doldrums until investor confidence starts to sag and fear starts to displace greed as the emotion of the day.

There undoubtedly will be some pretty heavy selling in the gold shares Monday. But the Australians, South Africans, and Canadians already plunged on Friday when the U.S. markets were closed. I doubt if these will go down much more in the immediate future unless bullion dives again.

(Sat Jul 05 1997 17:12)
i agree with you. i accumulate gold for it's time proven value. gold's price in fiat money ( dollars ) is irrelevant to me in the short run. i guess gold is my savins and i'm an accumulator not a speculator.

(Sat Jul 05 1997 17:14)


Also, you must know I only trade ABX.. I was looking for weak support just
above US$20.00 and see better support just below US$19.00 ( maybe as low
as 18.50.. ) So this could happen soon and I will go long again for the bounce.
But Im very cautious and respectful of overwhelming market pressures..

There is a slight chance ABX will go to US$16.00.. This would be a 50% loss
in approx. 6 months. Some fib numbers both in time and price suggest this.

George S. Cole
(Sat Jul 05 1997 17:22)
NOTAGOLDBUG; I agree with you that investors will sit out a 10% correction. We have had two corrections of this magnitude already and the market came roaring back after both.

But a 20% drop would be another matter entirely. A very large proportion of today's mutual fund investors have never seen a decline of this magnitude and in surveys most say they never expect to see such a drop in their lifetimes. Also important to consider that 401K investors can sell their stock funds WITHOUT INCURRING ANY TAX LIABILITIES ON THE PROFITS.

Signs of caution are beginning to appear at the mutuals. Vanguard just published a booklet,"Bear Markets -- A Historical Perspective on Market Downturns." From the introduction:

"This brochure provides some perspective on past bear markets and offers several guidelines on preparing your investment program for the next -- AND INEVITABLE -- extended market downturn." Some in the industry know this blowoff will end very badly and are moving to prepare shareholders for rough sledding.

(Sat Jul 05 1997 17:36)
George S. Cole:

Respectfully, I personally agree with your previous statement..
But if there are so many "preparing" for this inevitability doesnt
this suggest "short term" that we are not yet to the precipice..

The mutual fund mania is a "mindless" way of investing. Using
the terms "long term", "10%", 20% corrections. As reasons not
only to stay "long" but add to positions.. I believe if most Gold
investors were only -20% in so many days they would be concerned
but not devastated.. Many mutual fund equity investors have 20%
plus gains this year alone..

I dont believe it is that easy.. I do think this is a mindless mania but
manias can go far beyond all rational thinking. The market is very
tough for the intellectuals who know the truth.. Most investing is not
done with any real knowledge of the facts.. Me included..

(Sat Jul 05 1997 17:39)
AUROPHILE: Your 14:14 post was a good one. I have been re-reading The Great Reckoning ( Davidson, Rees-Moog ) Chapter 11 covers Deflation quite well. For those who don't have access to the book. I am very briefly going to summarize the Deflation warning signs: 1Rising percentage of debt to GNP. 2.High returns on forms of investment. 3. Debt compounding faster than income. 4. Falling ratio of M-2 to the Monetary Base. 5 Falling ratio of money supply to debt. 6. M-3 more than 12 times Treasury Gold supply. 7. Overextended collateral. 8 Foreign debt defaults. 9. Financial scandals

(Sat Jul 05 1997 17:50)
Victory funds
From recent semi annual report of Victory Funds:
"... There is also some evidence that historically, periods of high valuations have coincided with periods of high volitality. Although past performance is no indication of future results, it is well worth keeping in mind that diversification is one of the best defenses against volitality." Including up 10% of net worth in gold!

(Sat Jul 05 1997 18:13)
with all the doom & gloom surrounding mellow yellow, widely publicized etc.. you would expect a sudden and sharp sell off very near term, ie. this week. I mean, like $100 US/oz down. Why not? If gold really sucks, and is useless refuse, how can the price hold in this light? Even perma bulls would want to wait for the soon to be had bargain prices on the horizon. Scoop of Kruggies for 200 $. Where on earth is the support for these inflated prices of 324$ going to come from given the big volume on the LME? who is nuts enough to buy? and why are they buying?

(Sat Jul 05 1997 18:28)
MIKEHARRY: They are buying for this reason. Perspectives: Flawed visionary who burst
his own bubble

Originally published: SATURDAY MAY 31 1997

By Antoin E. Murphy

Convicted Scottish murderer and prime minister of France causes Europe's
biggest stock market crash." Such could have been the melodramatic
headline of a gazette in 1720. Nine years later the headline might have
read: "Man who once controlled half of North America dies in Venice."

Both headlines would have summed up aspects of the extraordinary career
of the economist and policymaker, John Law, who is in urgent need of
rediscovery for his contributions to an imperfect science, if not for his
outrageous escapades. The 18th century economists were colourful
personalities - none more so than Law, whose name is still pronounced
Lass by the French. Alas, poor Lass.

Many have lined up over the centuries to attack the Scotsman. Law has
been denigrated by Montesquieu, Voltaire and Marx. The latter described
Law as combining "the nicely mixed character of swindler and prophet".
One of the few writers to counter this trend was Joseph Schumpeter who
placed Law "in the front ranks of monetary theorists of all time".

Born into a goldsmith's family in Edinburgh in 1671, Law's spiritual birth
was really 300 years later - in 1971. This was when the last vestiges of the
gold standard were removed from the international monetary system by the
US's decision to abandon the policy of guaranteeing the dollar in terms of

Law had the foresight to realise there was no need for the monetary system
to be anchored to precious metals such as gold and silver. When prime
minister of France, he wanted to leave it free of specie ( or coin ) ,replacing
gold and silver with banknotes. He also attempted to convert France's
debt into equity in the Mississippi Company.

He was an early incarnation of Michael Milken, the man who made the
junk bond famous and went to prison for securities fraud in 1990. Law
attempted to convert government debt into junk equity. He was so
successful that the British authorities, fearful of lagging behind France in
financial innovation, copied part of his system by permitting the South Sea
Company to take over the bulk of the British government's debt. This led
to the South Sea Bubble of 1720, when the company's shares rose from
130 in January to 1,050 in June.

(Sat Jul 05 1997 18:56)
mikeharry: If the price of gold does go down to $200 or below, I for one will buy all I can, but I don't believe it will happen.

In the FWIW dept: The North Koreans crown or inaugurate their new leader on the 8th. The Syrians have opened three roads to Iraq after closing their border during the Iran-Iraq war. This is in response to a new Israel-Turkey alliance developing. While we mourn ( or enjoy ) the protracted, serious illness of gold, the rest of the world keeps moving along.

(Sat Jul 05 1997 19:07)
This was posted at another site:

pmdhrh: . . . . Sat, Jul 5, 5:13PM CST ( -0600 GMT )
newsflash....Live Martians Found! Their 1st question ... How do we buy Spoos?

(Sat Jul 05 1997 19:34)
Get your Free Newsletter on Resource and Tech Stocks.We go against
the majority and profile solid Companies.Email for your FREE subscription
to or visit our Website at

(Sat Jul 05 1997 19:35)
To All:

Sundays Melborne Age a leading Australian Newspaper printed the following:

Swipe for Reserve on gold sale

By HELEN SHIELD of the Sunday Age

THE World Gold Council has taken a swipe at Australia's
central bank, accusing it, and, indirectly, Treasurer Peter
Costello, of shooting the local gold industry in the foot.

Responding to the sale by the Reserve Bank of Australia of
two-thirds of its gold reserves in just six months, the council,
which represents heavyweight gold miners from around the
globe, warned it would have wider negative consequences for
the Australian economy.

Speaking from Geneva, chief executive Elliot Hood told `The
Sunday Age': ``You ( Australia ) are shooting yourself in the foot.
Your second-largest export sector has just been shot seriously in
the foot.''

The Reserve Bank sale prompted a sell-off in Australian gold
stocks and wiped $US10 an ounce from the gold price, which
ended Friday at $US323. In a statement announcing the sale,
Costello said gold no longer played a significant role in the
international financial system.

``Before proceeding with the sales, the RBA sought and
received my approval to reinvest the realised gains in other
official reserve assets,'' Costello said, adding that the sale
proceeds, an estimated $2 billion, could have been returned as a
dividend to consolidated revenue.

Hood said concern about central bank gold sales had diminished
the value of public and private gold holdings, with an especially
negative impact on gold producers in Africa, Latin America and
the Pacific Rim, where Australia was trying to take a leadership
role in APEC.

He warned that if the Reserve Bank needed to replenish its gold
stocks, it would have to buy from local producers, reducing their
foreign earnings. He said the buying, using Australian dollars,
would create local inflation.

``In any event, the actual impact of the sale has already
depressed the gold price from the middle of last year,'' Hood
said. ``So you could sit down and calculate what that's cost
Australian producers in dollars and cents.''

Locally, gold players are dubious about the wisdom of the
Reserve Bank move.

Great Central Mines chairman and Melbourne Football Club
president Joe Gutnick described the central banker's gold sale
as ``disappointing and bizarre . . . It just sends a very negative
message to the Australian gold industry, which is our
second-biggest export after coal''.

WMC general manager corporate development Chris Leptos
said the miner, formerly Western Mining, was deeply concerned
about the effect this sale could have on the West Australian gold
mining industry. ``We are a big firm in the gold industry, but a lot
of gold players are pretty much in the same postion. There are a
lot of new developments coming up that are good for the
country which may not now see the light of day,'' he said.
``Many of those are being developed by small and
medium-sized producers who do not have the economies of
scale to cope with low gold prices.''

But pollster and major shareholder in Haoma Gold Gary
Morgan said the RBA had made the correct decision.
``It doesn't make sense for Australia to hold gold in banks when
we have plenty of it underground''.

He said the council, which markets gold for jewellery, needed to
focus on marketing gold for a broader range of uses.

The Treasurer yesterday declined to comment further.

(Sat Jul 05 1997 19:51)
My personal viewpoint is that we are headed for a deflationary recession. ( depression? )
The current stock market is is still linked to interest rates ( ie:bad news for the economy is good news for stocks ) but I would suggest not for much longer. This is an inflationary phenomenon and the pundits that are suggesting blue skies forever because they can not see anything that would kick up rates which would slow down the economy and then bring down the market. This is the inflationary recession model that we are all used to but it is "fighting the last war."

Note Japan's deflationary recession: stocks are still at 50% of 1989 levels during a period of not just falling but collapsing interest rates. If you bought equities on interest rate drops in Japan over the last eight years you would have been slaughtered.

Interest rates will become delinked from the stock market when profits begin to freefall.

Some random deflationary observations: ( sorry for repeating anything previously posted )
-deflation is the norm: is it not the roll of capitalists to beat up each other and reduce prices? Inflation traditionaly occurs during times of war and deflation during times of peace.
-with the fall of the Berlin Wall in 1989 the worlds supply of land doubled; we now compete with highly educated and productive former communists and east asians who works for a fraction of first world labour costs - both issues are very deflationary
-baby boomers are saving more and spending less as retirement rears its ugly head ( "you mean $50000 is not going to cover 35 years of retirement?! )
-governments are beginning to reduce or eliminate deficit spending - less supply of bonds and more demand for savings ( not investment ) instruments means lower interest rates
-the typical age of household formation is 25 and when demand for housing and consumer durables kicks in - was anyone born in 1972?
-watch S&P500 top line earnings instead of just bottom line - many are starting to fall
-the historical return demanded by a long bond holders is inflation + 3 - this implies that current real rates on bonds are high and have huge downside potential as deflation kicks in - I would argue that current monetary policy is at best neutral and probably restrictive - if the economy does cool how low would interest rates have to go to be stimulative? As Japan has found out, low rates can be like pushing on a string.
-advances in technology and productivity have also been deflationary
-the US stock markets are parabolic and in uncharted valuation territory. With valuations stretched to the limit any reductions in earnings will lead to the inevitable collapse. The resulting negative wealth effect will be deflationary.

My question is how do we profit from a senario like this? Clearly equities and real estate should be avoided. I am currently 10% gold but what do you do with the rest of your money? Can anybody give any reasons not to back the truck up and buy long bonds? What will it take and what is the probability that gold will rally in a deflationary environment.

(Sat Jul 05 1997 20:12)
Dana -- If the government were solvent, and did not depend so heavily on their, 'blue sky', income tax collection schemes, perhaps bonds would be a good deal now. BUT, If deflation comes, how does the government pay the bond holders? With more expensive Dollars? Given the current vilification theme of this era, I think bond holders will be portrayed as fat cats living off of the sweat of someone elses brow. This will then lay the ground work, not for defaults, but screwing the bond holders good. This could be done through taxes or, 'debt extension', or something else. I don't make a living at politics, so my imagination is somewhat limited in this area. :- ) )

(Sat Jul 05 1997 20:48)
Could Gold be making a 1985 type bottom? Based on a weekly close the 14 week rsi in Gold on 1/4/85 was 21% one of the lowest readings in 20 years. The close that week was $300, on 3/8/85 the rsi was 27% and the market closed at $288 and traded down to $281 that week. That low marked the bottom of a multi year advance. On 2/7/97 the weekly rsi was 13% the lowest in 20 years with gold at 343. This week the rsi is at 26% and about $20 lower in price, similiar to 1985. This market could still go down to $314 base Aug.. Thank Goodness for stops. Being stopped at 336 doesn't look so bad now. ABX - Based on the Canadian market Fri, ABX could open 1.50-2.00 lower, this would put it though support. If it stays down there I would consider selling my postion. Luckly I'm short Nov Beans from 6.60. Going down to Texas for a couple weeks to check on the kid and inlaws/outlaws. Good trading everyone.

(Sat Jul 05 1997 20:53)
@New England
I just left AOL. My Neighbor was barbequing and we started to talk about internet service. I told him that I had signed up for an offer from AoL for unlimited access for a year for 59 bucks. He looked at me in horror and said he did the same thing and ended up with an internet bill of 1300. Apparently in the offer it said you must get another ISP and then access AOL if you didnt ( this importantly was stated nowhere and probably why they promise refunds ) .It was not obvious that you needed another ISP therefore easy to not do so and think the lowball was a mkting deal. Why would I go out and pay another ISP to access to AOL and then pay 59 to AOL. The representative was very kurt and I told him I wanted a refund/ he finally relented but said even though he promises the refund there were no guarantees. I called the company that takes the charges and they said there were another 60 of charges which AOL ( the rep ) did not mention. I cancelled our credit card and put all AOL previous charges in dispute/Where is the press on this practice. If they try to affect my credit rating they WILL BE IN COURT!! with a countersuit and if they have done this to others a class action! Unbelieveable!!

(Sat Jul 05 1997 21:09)
Deflation ? I think not !

To : Dana

Your 19:51 post regarding deflation was interesting. My comments :
1. Deflation is not the norm - it has not occurred in the US since the 1930s
2. The info I've seen is that US savings rates are currently near record lows
3. There is no evidence that governments are reducing deficit spending. Federal debt increased by $330B in 1996 ( only the "reported" deficit is decreasing )

IMHO, if you think we are headed for deflation, then don't buy gold. However, my belief is that the US money supply will be increased to whatever level it needs to be to avoid a recession during the next 2 years. There is no objective limitation on how much money can be introduced into the economy.

Regards, Milhouse

(Sat Jul 05 1997 21:29)
WW - Want to know why I'm always happy? I pay my provider the equivalent of just about exactly $20. U.S. per month for UNLIMITED access. I never have trouble connecting and the download time is VERY fast even though I only have a 486. AOL is a definite rip.

(Sat Jul 05 1997 21:37)
WW: I just tried to email you but realized you had quit AOL. I just added AOL @ 9.99 per month over my smartworld isp. My daughter
likes the AOL format and email and chat modes etc. She has some friends
who collectively chat for hours ( when she can dynamite me out of this
comfy chair ) . My ISP is paid for so it's no big deal. I paid
smartworld $115 total a few months ago and now they have gotten past
their growing pains so I can get on line easily. It's free until the
advertising quits paying the bills. A couple of more months and I will
break even. You are correct in saying that the instructions on AOL are
not apparent. I had to dig them out and I knew what I was looking for.
I dropped Compuserve for gouging me on rates. AOL is looking at buying
Compuserve again. What a combination!

I re-read your last and agree that it is tough to remain bullish. I
quit telling people what I'm invested in. Even the know-nothings are
reading about gold! I just talked with a neighbor who is an expert on
silver numismatics and he doesn't think gold bullion will ever come back. I guess that leaves it up to you and me!!! One day we could own it all.
@ .10 per oz. oh well. I am irrationally convinced that at least one
conspiracy theory, war or market crash will actually happen and save us
and make us heros. : ) Go George Soros!

(Sat Jul 05 1997 21:45)
Deflation II
Panda -- Thank you for your response and for your ongoing 30 year bond charts. You have a great point. I have convinced myself of the deflationary recession senario and am trying not to become irrationally exuberant with bonds because I have the gut feeling I am missing a part of the equation.

Some further random deflationary thoughts:
-with free flow of capital an unskilled worker in Europe/North America bring the same thing to the economic table as an unskilled worker in China - prices ( wages ) will converge
-the establishment of the bond futures exchange in Chicago during 1979 has since eliminated inflation. The slightest signs of inflation are instantly squeezed out of the system
-because governments cannot borrow at 6% and reinvest at 0 forever the welfare state is toast
-consumers are maxed with credit so the current credit based financial/economic expansion will soon hit the wall - bankruptcies are currently going through the roof
- many use a flow up funds arguement to explain why the stock market is booming, but the only way a market can go straight up is with leverage - I would not want to be around when this obvious leverage is unwound
-note all efficient frontier calcualtions and the resulting recommendation to have 70%+ of a portfolio in equities is based on 50 years of inflationary data not deflationary
-the mechanics of the 'normal' business cycle are different than what has happened over the last 50 years - Use Japan, 19th century US, technology, real estate in the 80's as an example of what to expect - abnormally high profits lead to capital spending which leads to overcapacity - price wars eliminate profits - capital spending is eliminated and the survivors buy out the bankrupt - exhange of capital is common but the demand for money falls so the price ( interest rates ) must fall - this is the opposite to an inflationary recession where high rates slow done the economy
-I recently read a report from a leading US research firm - of all the 60+ sectors they covered, only two could currently report positive pricing power: potash and oilfield services

I would certainly appreciate any feedback on how to profit from this. Some combiantion of gold, gold stocks at 50% of book value, bonds, and put warrants?

(Sat Jul 05 1997 21:46)
No AOL for me ever
WW Having used local Isp for years, available most everywhere with unlimited usage for $18 -$20 month and being very well satisfied, I recently visited my daughter who lives on LOng Island and had occasion to use their AOL service. 20 or so junk mail arrivals every day, every screen cluttered up by advertising, each and every URL requiring at least one extra step, NO WAY.

(Sat Jul 05 1997 21:47)
MILHOUSE: I have seen it posted elsewhere that Princeton Research has called for a secular low in gold next week providing there is sufficient pessimisim. Owing to your earlier imput on Princeton, have you heard of this through your fund or other contacts.

trader ed
(Sat Jul 05 1997 21:51)
My older son is a research oceanographer, and he told me yesterday that the indications are good for a rather hefty el nino to hit this winter ( Northern Hemisphere ) . He said that it is too early to be more specific, but suggested that I may want to look at what happened in the last significant el nino back in the early 80's, and take that into consideration in my investments. This backs up earlier media reports on the possibility of an el nino, but I would rather trust my son's judgement than media reports, as I do not consider the media to be especially accurate in any of their reporting.

(Sat Jul 05 1997 21:56)
@ the edge
After the diabolical antics of those dudes in OZ I will let these dudes
have the last word on the matter. Might just explain some of the events
at Kitco over the last few days.

(Sat Jul 05 1997 22:01)
@El Nio
Trader Ed: The early 80's saw massive hurricane Allan, and killer freezes all the way to the Rio Grande Valley. Perhaps some oil and energy services stocks would be in order?

Michael Chesser
(Sat Jul 05 1997 22:06)
I want to profit if gold goes up, and the easiest way to participate in gold if thru gold mutual funds. But recently I've read that most gold mining companies "sell forward", ie, sell their production years in advance, and therefore with their stock I might not benefit from a run-up in the price of the metal. Can mining companies which do not sell forward be identified? Do they all sell in advance now? What to do?

trader ed
(Sat Jul 05 1997 22:16)
My older son is a research oceanographer, and he told me yesterday that the indications are good for a rather hefty el nino to hit this winter ( Northern Hemisphere ) . He said that it is too early to be more specific, but suggested that I may want to look at what happened in the last significant el nino back in the early 80's, and take that into consideration in my investments. This backs up earlier media reports on the possibility of an el nino, but I would rather trust my son's judgement than media reports, as I do not consider the media to be especially accurate in any of their reporting.

(Sat Jul 05 1997 22:20)
Mooney, WW: I pay C$16.57 a month for unlimited access and it is no problem to connect. AOL was going to give me a months worth of their service but I had to connect to their US server. Estimated cost $10 per hour for long distance. I know we are polite but stupid not.

(Sat Jul 05 1997 22:27)

To : Vieserre

A Special Report on gold and silver issued by Princeton in Jan 97 stated that critical support for gold was in the 325-331 price range and that gold would likely test this support in 1997. Further info issued in May stated that the most likely timing for a low in gold was early July ( ideally the week of the 7th ) or Q1 1998. If we get a monthly close on spot gold below 334 AND penetration of 320 AND a yearly close below 341, then the low in gold will be during Q1 98 in the 255-275 area. I should receive some more info from Princeton next week and will post a summary of their forecasts.

Note - Martin Armstrong is very bullish about the medium term prospects for gold, but is very negative on silver. He refers to silver as the commodity from hell and sees a greater probability of $3.25 before $6.00. He has been calling for gold to decline ahead of silver for some time with gold then recovering and the gold/silver ratio going over 100 during 1998.

My own opinion is that the fundamentals for silver are worse than those for gold. Digital cameras will take a significant amount of the market and this may be why large commercial buyers of silver are not concerned about falling inventories. Also, silver does not have the huge volume of forward sales above the current market which will be covered on a rally. There are many gold forward sales contracts which were established at prices above $400 and which would be closed out to continue the forward momentum of any substantial gold rally. Additionally, silver is not widely accumulated as money anymore and would not benefit to the same extent as gold with a loss in confidence in paper money.

Best regards, Milhouse

(Sat Jul 05 1997 22:31)
hhhhhhhhhhhhh @ 16:23 -- You are correct, if gold was in a bull market the emphasis would have been on who bought the 167 tons of OZ gold. That's the difference between a bull and a bear.

(Sat Jul 05 1997 22:33)
Aurophile: Thanks for the Central Bank gold stats!!!

(Sat Jul 05 1997 22:38)
@Abandon hope all ye that enter here
Michael Chesser: The first thing that comes to mind is "Go back it's a trap". Gold is falling, stocks are being hammered. Precious metal funds are down 20 to 30 percent with precious little hope for rescue. If that doesn't dissuade you then you've come to the right place. Forward selling is good right now for companies which contracted at $400 or thereabouts, because it will keep earnings high while the price of bullion is low. Read through the posts here for the last couple of days or more if you have time. This issue has come up before. Homestake ( HM ) is one company that has not completely forward sold their gold, and I believe Echo Bay may be another. These companies will be hurt the most as the price falls and will fare better than others when the price rises.
Be aware that the price of gold must rise about $80 before it matters.

(Sat Jul 05 1997 22:38)
Fidelity Select American Gold & Precious metals Charts
5 Years, 30 day comparison and hourly charts at:
Click on Gold Sectors

(Sat Jul 05 1997 22:39)
BW: Good posting at 16:53. Some things have changed. Mass communications and instant communications are new during the last-half of the 20th century. Perhaps, using your words, the greatest con game in the history of the world is only possible because of television, the Internet, and instant communications. The brokerage houses and Washington bombard the media with bullish spins on every development. Nonetheless, the reality of our financial mess cannot be ignored permanently -- someday soon investors will wake up to reality.

(Sat Jul 05 1997 22:40)
Credit where credit is due

Front - although I am usually more than happy to take whatever credit comes my way I cannot, in all honesty, except the praise accorded to me in your recent post. The forecasts you referred to were extracted from info received from Princeton Economics. I generally try to state the source of my information - in this case I obviously forgot. My apologies.

BTW, I tend to rely on fundamental analysis only and take long term positions as I believe it is impossible to predict short term market movements with enough reliability to build substantial wealth. How Princeton is able to do so well for their clients ( including myself ) through the trading of futures and options is a complete mystery to me.

TTFN, Milhouse

(Sat Jul 05 1997 22:41)
Jesse @ 17:12 -- Great words of wisdom.

(Sat Jul 05 1997 22:43)
CB Gold

Steve Puetz - would you please let me know the time and date for Aurophile's post on CB gold stats.
Thanks, Milhouse

(Sat Jul 05 1997 22:50)
JUNK BONDS: The mania reaches new heights. The greater the basket-case, the more investors want to buy their debt! According to Barron's today: "An unbelievable $17.3 billion of junk bonds hit the market last month, easily surpassing earlier records of $13 billion set in December 1987, and $9.5 billion in May 1996."

According to Barron's, July is set up to be another heavy month for junk bonds -- unless the market ( and irrational exuberance ) become saturated.

(Sat Jul 05 1997 23:02)
Dana: In general, your 19:51 posting was good. However, there are two points I disagree with. 1 ) Baby boomers are not saving -- Instead, they are borrowing to accumulate holdings in stocks and bonds. There is a huge difference between borrowing ( speculating ) to acquire an asset and saving. 2 ) During deflation, credit-risk becomes an important factor in buying bonds. Very few people know, or have even researched what happened to US Government Bonds during the early 1930s. Because of the liquidity squeeze and credit-concerns, US Government bonds declined -- yes, I will repeat that -- they declined during the violent deflation of the early 1930s. That happened in spite of Federal Reserve attempts to jump-start the economy with lower short-term interest rates.

Investors often jump to the conclusion that deflation means lower gold prices and higher bond prices. The reality is just the opposite. Credit-risk and safety concerns typically cause investors to flee paper for the safety of the precious metals. Deflation is rearing its ugly head in a manner that hasn't been seen in over 50 years. Presently, most people are giving it the tame name of disinflation. But deflation is much nastier. Gold and silver are the only viable protection against deflation. You will get slaughtered if you invest in US Treasury bonds as a deflationary hedge.

(Sat Jul 05 1997 23:08)
@ CB gold holdings
Milhouse: In believe 6pak and Aurophile posted the gold holdings of various Central Banks since 1960. I think it was yesterday. Maybe they would repost them. Essentially, Australia, Canada, The Netherlands, and Belgium have sold all of their gold -- they have no more to sell. New Central Bank gold sales will have to come from other sources.

(Sat Jul 05 1997 23:08)
@unhedged.producers (less than 18 mo. forward)
Michael Chesser -- Unhedged producers make up the HUI index. More info can be found at

Scroll up or down and look for the HUI file. You will need Adobe Acrobat to see/download the file. If you don't have Adobe, you can jump to their URL from the AMEX site to download a copy of it.

(Sat Jul 05 1997 23:17)
@....check your calculation
Miro: The Aussie gold dump of 160 tonnes = about $2 Billion not $1.5 TRILLION. Your point is still well taken regarding the percentage drop in gold price but the value of gold is down about 20% over one year and about $35 above the March/85 low ( about $285 ) . Think of the values in real terms over the years and gold clearly is a big loser asset in comparison to other investments.

(Sat Jul 05 1997 23:17)'s.worth(Not much!)
Given golds recent performance, at the current rate of 'price' decline, gold should be at $298/oz. by the end of the year. Extrapolating further, by the end of 1998, it should be at $226/oz. This is based on a straight line decline, such as we have been witnessing. The good news is, by 2001 or so, gold should be about $10/oz. At this price, you could buy a lot of it. It worthless anyhow, right?

The above is an illustration of absurdity, by using absurdity. I hope. :- ) )

George Cole
(Sat Jul 05 1997 23:25)
MILHOUSE: So Princeton says we either bottom next week or go much lower into early 1998. We shall see. I expect a bottom within the next few weeks. How low we will go is, as always, quite uncertain. APH has mentioned $314 and GLENN $313; these are in line with my own thinking.

(Sat Jul 05 1997 23:32)
While some are whining about ISPs, I will whine about software used to shut down computers from UPSs ( Uninterruptable Power Supplies ) .

The software works just fine as long as you don't need a modem on a serial port.

Oh, you need a modem. Well, just put in a loopback adapter.

Oh, now you're modem works, but you can't communicate on the Internet because of the loopback adapter.

Well, if you have a power failure, at least your operating system will be shut down in an orderly fashion along with any open applications. Then the PC will be powered down safely. Why you can even configure the software so that the PC will boot up on power recovery! Just think, no more crashes due to power failures during unattended operation!

Buy you still can't use the modem because of service conflicts on the serial ports and the loopback adapter.

But isn't it a great product!

(Sat Jul 05 1997 23:33)
Milhouse: 6pak posted CB Gold Reserves in% Jul 05 10:43 and as million ounces at 00:24. Just happened to print'em! Here is aurophile post, Date: Sat Jul 05 1997 11:39
aurophile ( ) :
6Pak: Thanks for those numbers. Could you direct me to the source? Email or here is fine.
I have IMF numbers on millions of ounces held by each IMF member from 1975-93.

(Sat Jul 05 1997 23:34)
you're = your in panda speak.

itsy bitsy trader
(Sat Jul 05 1997 23:41)
@water spout
I couldn't help all the AOL bashing and lawsuit threats. I find it strange that many analysts suggest AOL as a buy ( the stock ) . It seems like a dog with fleas to me ( especially over the long term ) . Oh well, you know those analyst ( recommended stocks they have so they can pump and dump and move on ) . You may even see them recommended gold stocks 6-9 months from now. : )

itsy bitsy trader
(Sat Jul 05 1997 23:42)
@water spout
I'll be posting my blue horse shoe pick around 9:45 ET Monday morning.

(Sat Jul 05 1997 23:44)
I don't know if this was posted earlier or not, a story on the dismal outlook for SA gold shares.

So how does Western Deep figure in all of this? I never see them mentioned anywhere.

(Sat Jul 05 1997 23:46)
MILHOUSE: Thanks for the information. Your comments on silver are compelling. I notice reports coming out of the East reflect a falling off in gold demand despite the falling price in gold with jewelry being remelted in Pakistan due to economic problems and Indian investors directing funds toward the stock market.

(Sat Jul 05 1997 23:50)
@blinded by science!
AOL and their ilk ( stock wise ) come under the heading of, "Blinded by technology!" O.K., it's a take off on an eighties song. The effect is the same, if it sounds too good to be true..... You'll find out in one of those brokerage statements sooner or later.

itsy bitsy trader
(Sat Jul 05 1997 23:50)
@water spout
Should have written:

I read all the AOL etc.

Need to get some sleep ( big week ahead ) .

(Sat Jul 05 1997 23:54)
Puetz -- Thank you for your response. I was not aware that US bonds were hit in the 30's.

It may very well be an error to extrapulate the Japanese bond rally in a deflationary recession to what may happen in North America under similiar circumstances. Japan had the advantage of a powerful currency, low debt to service, and a trade surplus. It is the opposite in the US.

Credit risk may very well be an issue in Canada & the US if we hit a deflationary recession and tax revenues dry up.

itsy bitsy trader
(Sat Jul 05 1997 23:55)
@water spout
aarg ( should have been I've ) . Anyway, I find it odd for the Aussies to be dumping gold. Killing their mining industry?!

It seems mining is pretty important in RSA, Austraila, Canada, U.S. ( also
Russia, South America, and other parts of Africa but they wouldn't be expected to hold much reserves based on their economic situations ) .

(Sat Jul 05 1997 23:58)
@...why commodity gold pricing is a better solution
The speculative action on gold price is a result of the impending death ( real or perceived ) of the yellow metals currency or store of value use.
Gold is primarily used in jewellry ( 70% ) and industrial products. When the price of gold stabalizes on the basis of its "real" value - as a commodity - we can focus on the fundamentals of metal discovery, mining, refining costs and market demand, and lesser on the Gold Cartel and vagaries of international finance and economics. ( The Peter Lynch approach. )

I have been accused of repeating Andy Smith and Ted Arnold's opinions but I don't know ( or care to know ) who these people are.

When gold is free from the currency jugernaut it will resume a price dynamic that is in line with supplier costs and customer demand.
Speculation has stretched the yellow metals price and torn a few financial tendons. Speculators have seized the market with the backing of the CBs and they call the play.

Both world wars in this century began with the Allies taking severe losses in the early years before they rallied and won decisive battles to turn the tide and secure victory.

The war on gold was begun by strategic attacks by CBs and followed by the speculators and gold miner forward sales that fuel the fire.

Eventually the enemy will back off as gold survives worst case scenarios ( $250-$300 ) or 'battles' and enemy ( speculator ) support lines dwindle after the big guns ( metal funds/pros ) have worn out ( risk/return ratio becomes unfavourable ) .

This classic metaphor is best illustrated by the VC who bested the Yanks in Nam. The world's mightiest nation and air power could not beat a bunch of short scrawny guys crawling through jungles and underground tunnels with few resources.

The motto is that sometimes - against all odds - the big guys lose. I don't have short-term guesses on the price of gold but I hold junior gold stks ( BGO ) and will continue to do so unless the gold mining industry capitulates - then I would have no choice but to also surrender and take my losses.

until that time ....cheers