All times are U.S. Mountain Time
MARKET REPORT (5/14/99): Market observers were astonished this
morning to see gold go down $1.50 in the face of a Consumer Price Index
surge of .7% which took the inflation level to just under double digits.
(At first, I thought it was a computer error.) Gold fall is even more astonishing
in the face of a full two point drop in the 30 year Treasury -- the benchmark
investment for dollar purist; a nearly 50¢ uptick in the price of
crude oil; and the Dow plummeting 110 points on the open. Yet, the primary
indicator of investor concern over inflation miraculously fails to respond?
All this lends additional credibility to the growing circle of analysts
who say that the metal is being manipulated -- that a Wall Street/ London/Washington
cabal is working to keep the gold price from rising in an effort to discourage
investors from leaving paper assets for the yellow metal, or worse working
to prevent an all out run to the metal that would undermine their large
and long established short positions. I say "worse" because if
the latter is the case the entire financial system might be threatened
by a run to gold.
Until proven otherwise, I will continue to harbor the opinion that the
Bank of England gold auctions are tied to the near (or actual) failure
of a major British financial institution involved in the gold carry (lending)
business. I see no other reason at this time why Britain's lender of last
resort would become so involved in the gold market at record low prices.
Somebody is getting bailed out and they need hard yellow metal to do the
bailing -- the printing press won't do.
My assumption is that the already strong market for physical gold will
step up worldwide as these inflation numbers are digested. Higher interest
rates are likely to follow and that is what the bond market is trying to
tell us. Alan Greenspan can act to counter the free market's drive for
higher interest rates by printing money. Such a policy would likely exacerbate
the problem. We still have the problem of the phantom federal deficit --
non-existent deficit if the politicians are to be believed -- which added
$115 billion to the national debt over the past 12 months. The market for
bonds is so bad that the Fed over the same period was forced to monetize
$33 billion (30%) of this non-existent debt to keep the government in business,
and it is the debasement of the dollar that oil-producers are reacting
to by cartellizing to drive energy prices higher.
But let's not waste our time talking of such banalities. What are internet
stocks doing this morning?
That's it for today. Have a good weekend, fellow goldmeisters.
The featured article in this month's News & Views centers
on government finance in an article entitled "The Financial State
of the Union." I'm sure it contains many surprises for our readers.
There is a great deal of difference between what our government leaders
are telling us and the reality with respect to the government's books.
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