JBP

Why Gold Enthusiasm Is 'Cool' Again

I mostly agree with your comments which go hand in hand with the thoughts of Jim Rogers. Jim thinks gold could fall back down to the 700's if the IMF starts selling some of their gold.

Rising Long-Term Interest Rates Go Hand in Hand with the Expanding Economy

On April 16, U.S. President Obama wrote a letter to congressional leadership seeking support for the U.S. government to loan the International Monetary Fund $100 billion. This is part of a plan for the IMF to expand its New Arrangements to Borrow (NAB) program from $50 billion to $500 billion.

President Obama is portraying this loan as an investment rather than an expenditure when he stated in the letter, "Such participation effectively represents an exchange of assets rather than a budgetary expenditure, and it will not result in budgetary outlays or any increase in the deficit. That is because when the United States transfers dollars to the IMF under the NAB, the United States receives in exchange another monetary asset in the form of a liquid, interest-bearing claim on the IMF, which is backed by the IMF's strong financial position, including its significant holdings of gold."

The supposed purpose of the increase in the NAB is to help combat worldwide financial crises. The United States would provide 20 percent of the assets for this purpose. China has already committed to lend $40 billion.

There is a small chance that the difficult-to-understand language in President Obama's letter could be taken at face value.

But, I don't really think so. There are a lot of implications to this proposed loan beyond what appears on the surface.

There is growing pressure on the IMF to actually sell some or all of its supposed gold holdings. If this pressure becomes strong enough that action is taken, there are a number of potential problems that could be exposed:



" The IMF does not physically hold the gold. It has been pledged by member nations who, in theory, have delivered the gold to one of four countries designated as depositories. The United States and United Kingdom are two of the designated depositories. It is entirely possible that one or more nations might, if called to turn over their gold, default on delivering their gold commitment.

" Although the IMF tries to pretend that it audits the gold holdings, it then immediately contradicts itself by reporting that holdings in depositories are not audited by the IMF.

" There is significant suspicion that some of the gold pledged to the IMF has been leased. If the IMF were to try to sell it, that could force the recall of some gold leases.

" It is also possible that some of the gold pledged to the IMF has conflicting ownership claims.

" The IMF only theoretically has 3,217 tons of gold, which at $920 gold spot is worth only $95 billion. Where would be the collateral for the other $400 billion of planned borrowings?



I'm not saying that there is any outright proof of the existence of any of these above problems. However, when the Gold Anti-Trust Action Committee made multiple attempts to clarify the nature of IMF gold holdings. The IMF's answers simply did not respond to the questions asked by GATA. If there were no problems with any of these issues, I would have expected the IMF to make straight statements to that effect.

Another implication is that the U.S. government is holding the gold it has pledged to the IMF as part of the collateral for the "loan." At the most extreme, this may be a sneaky way for the U.S. government to accomplish two goals - increasing its gold position by reducing its gold liability to the IMF and increasing its physical reserves, and to latch on to IMF gold rather than let China purchase all of it. Under these scenarios, the "loan" would never be repaid in U.S. dollars.

If the U.S. government is really trying to find a way to acquire more gold, and trying to do so in a way that the public does not know about, the implication is that, at today's levels, the U.S. dollar is significantly overvalued. Also implied is that gold is underpriced today.

The known fact is that President Obama has asked congressional leaders to pass legislation to enable this $100 billion loan. The rest is speculation as to what is really occurring, when placed in the context of all the other global financial calamities.

Precious Metals: Emotions Still Stronger Than Fundamentals

Mark&Shark and CLH are my idols. They talk about how smart they are and all the money they'e made on the right calls. I love it when CLH says gold has the same price now as it did in 1980. Do you think he's going to own DZZ for 28 years? No... He'll sell once he's made a comfortable profit which he better realize soon. That is if we believe he actually bought DZZ in March when gold was at a high. Extremely doubtful. Just ingore these guys as they are short gold and never make a compelling argument....

This Gold Correction Has Further To Run

8.19.2008
Commodities…Buy the Dips!

Commodities…Buy the Dips!
By James Rogers

The commodity bull market has a long way to go. This bull market is not magic. It's not some crazy "cycle theory" I have. It does not fall out of the sky. It's supply and demand. It's simple stuff.

In the 80s and 90s, when people were calling you to buy mutual fund and stocks, no one called to say. "Let's invest in a sugar plantation." No one called and said, "Let's invest in a lead mine." Commodities were in a bear market and in a bear markets people do not invest in productive capacity. They never have. Perhaps they should have, but they've never done it throughout history and probably never will. There has been only one lead mine opened in the world the last 25 years. There's been no major elephant oil fields [of more than a billion barrels] discovered in over 40 years.

Many of you were not even born the last time the world discovered a huge elephant oil field. Think about all the elephant fields in the world that you know about. Alaskan oil fields are in decline; Mexican oil fields are in rapid decline; the North Sea is in decline. The UK has been exporting oil for 27 years now. Within the decade, the UK is going to be a major importer of oil again. Indonesia is a member of OPEC. OPEC stands for the Organization of Petroleum Exporting Countries. Indonesia is going to get thrown out because they no longer export oil, they are now net importers of oil. Malaysia has been one of the great exporting countries in the world for decades. Within the decade, Malaysia is going to be importing oil. 10 years ago, China was one of the major exporters of oil, now they are the 2nd largest importer of oil in the world. Oil fields deplete, mines depletes. This is the way the world's been working for a few thousand years and it will always work this way. So supply has been going down for 25 years.

Meanwhile, you know what's happening to demand. Asia's been booming. There are three billion people in Asia. America's growing. Most of the world has been growing for the last 25 years. So supply has gone down and demand has gone up for 25 years. That's called a bull market.

One of the things you'll find if you go back and do your research is that whenever stocks have done well, such as the 1980s and 90s, commodities have done badly. But conversely, you find that whenever commodities have done well, such as the 1970s, stocks have done poorly. I have a theory as to why this always works, but it doesn't matter about my theory. The fact is that it always works this way and it's working this way now.

So before I set off to my second trip around the world, I came to the conclusion that the bear market in commodities was coming to and end. So I started a commodities index fund. [Editor's note: An ETN based on the Rogers International Commodity Index trades on the AMEX under the symbol: RJI.] This is an index fund. I do not manage it. It's a basket of commodities we put in the corner. If it goes up we make money; if it goes down we lose money. But since Aug 1st 1998, when the fund started, it is up 471%.

I [mention this index] to show you that the commodity bull market is not something that will happen someday. It's in process right now, and it's going to go on for years to come, because supply and demand are out of balance. And by the time we get to the end of the bull market, commodities will go through the roof. There will be setbacks along the way. I don't know when or why, but I know they are coming, cause markets always work that way. Commodities have done 15 times better than stocks in this decade and they're going to continue that [trend].

You remember my little girls. My 5-year old never owns stocks or bonds; she only owns commodities. She's very happy owning commodities. She doesn't care about stocks and bonds, but she knows about gold. I assure you, she knows about gold.

Some of you probably diversify, or believe in diversification. I do not diversify; I am not a fan of diversification. This is something that stockbrokers came up with to protect themselves. But you're not ever going to get rich diversifying. I assure you. But if you DO diversify, commodities are the best anchor because they are not going to do what the rest of your assets are going to do.

I will give you one brief case study about oil, because it's one of the most important commodities. Some of you know that oil in Saudi Arabia is owned by a company called ARAMCO. It was nationalized in the 70s. They threw out BP and Shell and Exxon. But the last Western company to leave did an audit [of Saudi oil reserves] and came to the conclusion that Saudi Arabia had 245 billion barrels of oil. Then in 1980, after 10 years, Saudi Arabia suddenly announced that it had 260 billion barrels of oil. Every year since 1988 – 20 years in a row - Saudi Arabia has announced, "We have 260 billion barrels of oil."

It is the damndest thing. 20 years; it never goes up; it never goes down, and they have produced 67 billion barrel of oil in this period of time. When nuts like me go to Saudi, we ask, "How can this be? How can it be that they always have 260 billion barrel of oil?" (By the way, last year they said they have 261 billion barrel of oil). And the Saudis say, "You either believe us or you don't," and that's the end of the conversation.

I have never been to the Saudi oil fields, and even if I had, I wouldn't know what I was looking at. But I do know something is wrong. I know that every oil country in the world has a reserve problem, except Saudi Arabia of course. I know that every oil company in the world has declining reserves. So I know that unless someone discovers a lot of oil quickly, the surprise to most people is going to be how high the price of oil stays and how high it goes eventually. That is the supply side. Let's look at the demand side.

The Indians use 120th as much oil as their neighbors in Japan and Korea use. The Chinese use 1/10th as much per capita. There's 2.3 billion people in India and China alone. Well, the Indians are going to get more electricity. The Indians are going to get motor scooters. They are going to start using more energy, so are the Chinese. But if the Indians just doubled the amount of oil used per capita, they would still use only 1/10th of what the Koreans use. If the Chinese doubled their oil use, they would still be using only 1/5th what the Japanese and the Koreans are using. So you can see what kind of pressures there are on the demand side for oil and energy, at a time of terrible stress on the supply side. These are simple things.

So I would urge you are to take a lesson from my little girls. My little girls are learning Chinese. My little girls are getting out of the US dollar. My little girls own a lot of commodities. I would urge you to do the same.


As always, be sure to do your own research to determine what best suits your goals and strategy. Whatever you choose, gold and currency diversification are a great place to start, so be sure to check 'em out.
Posted by Pipo at 6:55 AM 0 comments
Labels: jim rogers, jim rogers blog, jim rogers videos

Dollar Rally Won't Last Forever; Don't Give Up on Gold

Gold has more going for it than not going for it IMHO. Our economy is in trouble, more so than across the ocean. China has a surplus and just 1% reserves in gold. Matter of time before they start diversifying out of the treasuries. I could go on and on here on the "fundamentals", but the bottom line is that Buffett, Jim Rogers, Ken Heebner, & Stephen Leeb are all basically short the dollar and long commodities. I'm not the smartest guy in the world, but I know not to bet against these guys...

Dollar Rally Won't Last Forever; Don't Give Up on Gold

CLH,

I don't plan on holding for 28 years. Have you ever held an investment 28 years? In 3 years when gold IMO is 2K+ I may decide to get out depending on the markets. You need to make better cases for your opinions and it's quite obvious your short gold...

Gold (and Gartman) Haunting Some Investors

could not have said it better jason.

Is the Price of Gold Artificially Depressed?

FoxV,

GLD holds gold and issues baskets for redemption. Not paper... Correct me if I'm wrong.