J P

The Long Case for U.S. Gold

Not long USGL, but am long WKR, NPG, CGR, and TNS. USGL still intends to acquire these companies, and will likely do it for a premium of some such. Its an interesting question, now that USGL is much cheaper, whether these companies are a better investment or whether USGL is a better investment...if USGL goes down between now and the acquisition more than these companies do, then USGL might be a better investment, even with the premium (assuming you buy it after it goes down, not now.)

USGL is working on a listing on a major american exchange, and when that happens they will recommence the offers, I expect.

Gold's Downward Spiral Means a Buying Opportunity

What period of time did you use to come up with the 10:1 historical ratio for oil to gold? Oil has only been a industrial commodity for 100 years. I'm familiar with the 15:1 silver to gold ratio, which seems to have more history (but what that means for either metal, I have no idea.)

The real thing I'm getting at is-- what's a good proxy for valuing gold that will not be affected by inflation? Gold in dollars will go up as inflation is recognized by the economy... but I wonder about gold vs. steel or gold vs. iron, both of which have been known and used for thousands of years, and iron and steel, unlike silver, are general commodities not precious metals.

Glamis/Goldcorp Merger - Keeping it in the Family

Yes, a more sophisticated analysis (than I currently do) would take mine production costs, stage of development for the mine, country risk, etc into account.

I really don't think GG is buying GLG to try and form a cartel to support the gold price... I believe they are being honest when they say they are out to grow resources and production. They believe the price is going to go up for other reasons.

In a way, its unfortunate that companies are choosing to find gold in the stocks of other producing companies, rather than invest in exploration. This implies to me that they may think the price will peak before resources like NAKs and NGs are able to come online.

But glamis has been improving the grades of ore going thru its mills and decreasing the production costs, and so it seems like the companies are a good fit.

The price may have been high, and the market clearly thinks so, but I wonder if this will really cause the merger to fail. Etiher way, I'm long GG and wish I'd been long GLG, of course.

So, is your least comment to mean that this time around you don't think that the decrease in GG is a buying opportunity, unlike ABX?

Glamis/Goldcorp Merger - Keeping it in the Family

Phil, if you're going to talk about mining companes and gold so much, you need to figure out how to value them. P/E is an asinine statistic to use, because often very valuable companies are running at a deficit. Or are we to believe you'd rather buy a gravel quarry running at a profit and a P/E of 10 than a gold exploration company that has done nothing but run up $10M in losses over the last 4 years?

I guess you would, but I'd rather buy the company that spent that $10M and found $10B worth of metal, than a gravel pit that happens to be depleted.

Assets are what drives valuation for exploration and mining companies... and glamis, at $51 is a steal, the metal in the ground figure for it that I come up with is $354 per share, and that's a much better discount than GG shares are on an ounce-per-share basis. For GG I come up with $167 in value per share. The value you assing to ounces in the ground can be debated, but the ratio will be the same-- GG got a steal.

Gold — Don't Be Left Holding the Bag

Keep trying to talk gold down citing the 4Q of 2005 data, Phil. Maybe you just grabbed the wrong link, but at any rate, look at what happened in 2005, and how "Demand slackened" and "central banks dumped 665 tonnes" and gold went from $450-$550.

September may well be a down month for gold, and if that's all you're saying, great, maybe you can be a little more clear.

But you seem to be saying anyone who holds gold is a fool, and your data doesn't support that argument (or dispute it either) and to make it you're going to have to address the role gold plays and why people hold it. Since you seem to assume they will dump it on a moments notice.

Limits to Gold and Silver Growth: Supply Having Trouble Meeting Demand

Of course, like all commodities bull markets, this one will probably far overshoot the correct new long-term price for gold and silver. At constant demand, the increased future supply will come from more expensive locations using more expensive processes (though some simply comes from more sophisticated geology allowing the finding of high grade ore in places we simply wouldn't have known to look before.)

The real reason for a bull market in gold and silver right now is not constraint on finding new reserves, but constraint on getting the mines and mills built to process them an bring them onto market... the permitting process, construction and finncing is what, 7 years?

But I think the real root cause is the decline in the dollar. Increased demand is due to people seeking a safer place for their dollars. As they do so, they decrease demand for the dollar, and decrease its relative value, prompting more people to seek a safer place for the dollar, a vicious cycle once it gets going. A lot of that money is going to try to crowd into the tiny gold market, since gold's only really useful purpose is to serve as money.

Gold: Heading for a Trainwreck Due to Oversupply?

"but NY has actual gold but I just checked (you made me curious) and they do, in fact, have 9,000 tons of it in NY and there is even a tour so you can go see for yourself."

What keeps me responding is your dishonesty and misrepresentation. For instance, you say the above as if that 9,000 tons is US gold, it is not, it is owned by foriegn interests.

"You sound smart so I'm sure you realize GATA has an agenda so all the information they gather is, of course, going to prove the point of the Gold Anti-Trust Action Committe..."

Which is completely asinine in the face of the shear volume of carefully selected irrelevant facts you have cited here, or misrepresented here. The big difference is that GATA has evidence showing its theory.

Worse, when you present "facts" you're dishonest about it. You cite statistics as if they respond to a point when in fact that are completely irrelevant-- the Vault at the Federal Reserve in New York holding 9,000 tonnes of foriegn gold is completley irrelevant to the FACT that the annual report of the St. Louis Federal Reserve which I cited, shows that they hold zero gold, only gold certificates. Paper.

Unlike GATA, you are being dishonest with the "Facts" you cite, by snidely citing made up (eg the claim that hte US has %80 of the gold) or irrelevant "Facts" to support your position, while ignoring the real points I have made.

At first I thought you had just been mislead, or misunderstood and that you could be corrected. Now I understand that whether that is the case or not, you are a fundamentally dishonest person, and thus not worth wasting time arguing with.

I'm done here.

Oil Price - The Need to Put the Cop Back on the Beat

Yeah, oil is up in a speculative bubble, that's it, it couldn't be decreasing ability to find oil at inexpensive prices, it couldn't be the decline in Saudi Arabia's fields, it couldn't be WAR IN THE MIDDLE EAST! Its just speculators. Uh-huh.

Unfortunately your political ideology is distorting your perspective.

Inflation to Follow Oil's Direction

The price of oil doesn't change the money supply in any significant way. Thus, the price of oil has little effect on the rate of inflation. The rate of inflation is controlled solely by the federal reserve (at least inflation in US dollars) and they do so, not by changing interest rates, but by deciding or not deciding to create dollars to underwrite US federal debt.

I'm not quite sure why oil is down now, it should be well above $80 due to the Iran trainwreck that seems inevitable. But I'm certain oil will never see $35 a barrel prices in the US, at least not in a situation you would like.

The reasons are twofold:
1. The dollars used to measure a barrel of oil have been inflated massively for the past 30 years, thus only an increasing supply of very cheap oil acquired at ever greater political cost has been able to keep the price of oil down when measured in rapidly devaluing dollars.
2. The supply of easy to get cheap oil has peaked and is now in decline.

The only possible way we could have $35 oil again would be for the federal reserve to raise interest rates to around %20, stop underwriting federal debt, and start sopping up all those dollars in circulation with gold. But I am certain they don't have enough gold to do it.

If we'd kept to the gold standard, we'd already have $35 a barrel oil, even with its increasing rarity.

Gold Bugs, Don't Dig In Too Deep

Please read the GATA research you refer to- the manipulation has not been to keep the price of gold high, but to keep it low. The oil market is 12,000 times larger than the gold market (or was it just 1,000?) Thus gold is easier to manipulate. The Market Manipulation story IS the collapse of the dollar story IS the inflation story IS the easy money story.

Industrial metals are having a bull market because of supply and demand. Gold is having a bull market because of supply and demand, but not as much of one because gold is manipulated.

The question is, how long can people keep shorting gold they don't have before they are forced to account for their position? If they were forced to do so today, many of the nations largest banks would be insolvent.

Together they are short more gold than exists in the world.

Gold Bugs, Don't Dig In Too Deep

All of the developing and resource critical central banks have announced their intentions to increase gold supplies.

Sure western central banks will likely dump the last of their gold at some point (by the way, notice that all the pictures of the gold vault in the kids museum brochure you cited are from the 1980s?) The fact that you can't come up with a citation of how much gold is there to defend your position should be a clue to you-- why is it that fort knox has never been audited?

And why are you citing forieng owned gold as assets the US can use to prop up the currency? You're building in a gold confiscation into your assumptions without accounting for any other effects of it? (Who do you think owns the gold in the federal reserve depository in New York? Not the NY Federal Reserve, Federal Reserve gold, if any, is in Fort Knox. That vault is the US bullion depository for foreign entities and private US entities.)

The nickel exchange just went into default. The gold exchange is in a far more leveraged position as central banks short gold.

Why do you think they will be able to manipulate the market indefinately?

Gold: Heading for a Trainwreck Due to Oversupply?

There's a big difference between predicting that gold will hist $600 when its at $640, or $614, and calling for a "Trainwreck". In no way is $600 a trainwreck.

What you were seemingly saying is that the bull market in gold is over. This is very different. I won't debate where gold will go in the short term because I cannot predict it-- but I will say if gold goes to $600 or $550 even, it WON'T be because of central bank dishording-- even if your theory was correct, dishording is not what causes such small moves.

I think your ability to predice the direction of gold would improve if you understood more about the market for gold and the players in it, and so I suggest you read the GATA website. Frankly, to speak disdainfully about it and to publically make calls on gold is to reject one of the fundamantal sources of information about the gold market, they've already done much research on the subject.

Finally, on the subject of US gold holdings, you accuse me of the fundamental error you are making- that of confusing paper with gold. I am not undersestimateing US gold holdings, I simply went an pulled the annual reports of the Federal Reserve branches and looked at their holdings. They are not holding US Gold certificates, tehy are holding gold liability certificates-- that is to say, the leased the gold out years ago. Its not a "massive coverup" because the information is there in the annual reports for anyone to look at, if they will understand.

www.stlouisfed.org/pub...
Page 60.
$327M in gold "certificates". vs. $24B in outstanding currency. You assume these certificates are pricing gold at $42, and are US government certificates with gold backed at fort knox... but it does not say that, and this is not the case according to statements by Mr. Greenspan. Its not a cover up if you announce it publically and people turn a blind eye.

Gold Bugs, Don't Dig In Too Deep

Also, its worth noting that it is well documented that central banks participate in a gold price manipulation scheme whereby they shot gold on the commodity markets.

There is more gold currently short than there is actual gold above ground!

Recently the nickel exchange went into default when a similar situation got too extreme:
news.silverseek.com/Te...

The idea that central banks can dump gold on the market is laughable-- the idea that they have the same amount of gold in vaults now as they did 20 years ago is absurd. These agreements you mention came about to ensure that they dumped sufficient gold on the market.


We're in a gold bull market for two reasons-- First, they have run out of gold to dump suppress the price, and second the recognition of the decline in the dollar is gaining ground.

I'm no fool, I'll be a buyer of gold and gold related assets until I run out of dollars. Gold supply increases slowly with mine production, dollars are being printed like crazy and half to be printed even faster as the US runs deficits of every kind.

Gold: Heading for a Trainwreck Due to Oversupply?

Shad--

Being short gold stocks is a dangerous position to be in. What do you expect to happen? If you opened a short when gold was ahead of itself in the mid $700 then great, take your profits. But now? Look at the seasonal price history of gold. Its generally down in the summer, and up dramatically in the fall. Gold stocks are generally companies located in canada, and in canada the brokers take the summer off, so volume is down, prices are down, etc. Then in the fall, they come back and buy back in.

Consider buying put options on a major minor if you want to go short gold...at least then the worst you can do is lose %100 of your investment, instead of your shirt. Look at the price action of the positions you're short last fall... they were "Cheap" in september and quite dear in December.

The US is losing its place as the worldd reserve currency. Russia, India, China, South Korea, Singapore, Malasia, The UAE, Saudi Arabia, Iran, Syria, Pakistan, Turkey are all countries that have announced their intentions to diverisfy out of dollars and into gold. Phil may think that Russia, India and China are "small countries" hopefulyl you don't.

Also, why hold dollars when there is the Euro and the Yuan now? Both of these are the currencies of the future, the US government is acting irresponsibly and everyone knows it.

The US is a debtor nation- both internally and externally, our credit rating is effectively going down and the dollar is declining in value so holding large quantities of dollars is a bad idea.

What's the alternative? Silver? Maybe, Other currencies? Sure, the Euro is going to be more popular. Gold? Yes, historically this is the primary purpose and use of gold, and these countries have already started buying.

Gold: Heading for a Trainwreck Due to Oversupply?

Oh, its worse than I thought. You act as if $1 in 1833 is the same as $1 in 1964 (When we were still on the gold standard) and $1 now. In your world inflation doesn't even exist! Amazing!

Mines have not opened in recnet years because environmentalists and the price of gold made it untenable. Sure, some mines have increased production, but demand is growing faster, and demand growth is accelerating. You speculate as to what the source of the demand is, and you denigrate it as unsustainable-- but this is your speculation, not fact. More likely both historically and logically, is that gold has not increased in value so much as hte US Dollar has declined in value. Further, demand is coming from the fact that gold is a better asset to hold than dollars. Dollars are not trustworthy, while gold is an asset whose primary industrial purpose is to act as money.

Central bankers are not keeping the price of gold up, asinine statement that, as central bankers want to keep the price of their currencies up to cover up their inflating them. Think about it-- why do the central banks announce publically that they are selling gold? To depress the price. Why do they sell gold at hte bottom of the market and announce this publically? to depress the price.

Hell, I'm being a fool for even debating this with you. Alan Greenspan admitted in an interview and it was confirmed in FOMC meeting minutes that the federal reserve acts to manipulate the price of gold-- TO KEEP IT DOWN.

This is not up for debate, its a stone cold fact. And its the only thing that makes sense-- Central banks are not commodity traders "Taking a double off the table"... they are in the business of issuing fiat currency.