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Gold - Nowhere to hide for Shorts.

  1. galloper

    1,380 Posts.

    The recent breakouts in the XAU & HUI signals the beginning of Stage-2 of a bull market in gold and gold shares, and an official end to the bear market that has plagued gold since 1986. The gold manipulation cartel has lost. That doesn't mean they'll give up or that attempts at suppression are over.

    Gold keeps governments honest, which is something most modern governments can't stand. If gold goes higher it makes the job of the elites much more difficult in its efforts to convince the public that their fiat currency is really worth something. This breakout fortuitously has been accompanied by dollar weakness. The dollar has now broken 114.73, which will assist and confirm the gold share breakout. Breakeven hedge positions for Anglo-Gold are $300 an ounce, for Barrick $310 an ounce and Placer Dome $345 an ounce.

    The Australian producers are just about breakeven at $312 an ounce as the Australian dollar climbs in value. There are those in the kept media who would have us believe that the two are unrelated, nothing could be further from the truth.

    Central banks have attempted to demonetize gold as they did silver in the late 1960's. They were successful with silver because it was basically an industrial metal. Central banks are almost all committed to fiat currency and there is no turning back for them. They'll tell you anything to make you believe that the Federal Reserve note in your pocket has value or is backed by something. It is backed by nothing but the hot air that emanates from Alan Greenspan's mouth. Of course the media does anything it's told or paid to do. Witness Reg Howe's lawsuit. How can anyone believe or trust American journalism. Almost all the truth today appears on the Internet. Again, gold is not rising in anticipation of inflation but because of deflation and it is a flight to quality. We will eventually witness flight from all currencies except those with gold backing. Confidence is not only about to wane toward the dollar, but in regard to all currencies that are not fortuitously backed by gold. This time it is not the same as the late 1970's. This is much different. The similarity is with the 1930's. As you can see a breakdown in free trade has already begun and nations such as the US are selectively re-imposing tariffs. Mr. Bush tells us out one side of his mouth he wants fast track from Congress, and out of the other he imposes tariffs on steel and wood. Is it not apparent something is dramatically wrong with the dollar, when dollar parity in Argentina leads to its financial collapse? Look at the Mexican peso. It stubbornly held at nine to the dollar, and as soon as the dollar began to swoon it fell to 9.5. The days of dollar supremacy are over and economics are going to be simplified so everyone can understand.

    That is the hallmark of every depression, it teaches harshly by example. Make no mistake, gold is telling us the reign of the dollar is at an end - and the world will now have to struggle for economic survival. The good and easy times are over. All those who never had a bad day in their lives are about to enter a nightmare.

    Gold Fields says it will list on the NYSE on 05/09/02, with one ADR equaling one common share.

    Evidently a central bank sold 30 tons of gold last week, which was within the Washington accord. When all is said and done the British public will have lost billions of pounds on the misguided sale of 1,698,900 ounces of gold. The Bank of England can't seem to remember who ordered the sale. (Editor's Note: This is outrageous) Finally, the act was laid at the feet of the Blair administration and Chancellor of the Exchequer Gordon Brown. This might seem very simple, but it's not. They all were taking orders from their elitist overseers who had to restrain the price of gold, least it destroy their dream of a world fiat currency and world government. What they left is a benchmark of futility.

    There was no way they could have factored in Enron and its financial fallout, nor the clarion call that woke up the American public to the devious corruption that had infected corporate America. The attempt to suppress the price of gold for almost three years didn't work, unless the globalists wanted to buy time. Many reasons exist today that make it impossible to continue the suppression of gold prices.

    The game is over. A new game is about to begin.

    Both Iraq and Iran are now calling for an oil embargo against Israel and its supporters. If this becomes reality oil prices could edge much higher and gold prices with it.

    Word has it that Barrick wants to take over AngloGold. Not wanting to be taken over, Anglo is quickly reducing its hedge position so gold prices will go higher making Barrick's offer impossibly expensive.

    Michael Dudas, an analyst at Bear Stearns, has raised his 2002 gold price estimate to $310 an ounce from $300 - and sees gold at $325 in 2003.

    During a Barrick conference call their executive said, for the remainder of this year it will sell half its gold productions in the spot deferred market and half on the spot market. Its delivery of the hedged gold for hedged sales fell a net 200,000 ounces. Barrick is deeply enmeshed in extraordinarily complex derivatives, which could blow up in their faces.

    Sell Barrick and buy *Agnico-Eagle (AEM-NYSE) and *Goldcorp (GG-NYSE).

    On Thursday the Swiss sold gold and it was quickly bought up by the Chinese, Russians and others. The Swiss sold 7.8 tons over the ten-day period ended April 30,2002. This means they've sold 499.2 tons since their disposals began under a five-year framework initiated in 1999 by 15 European banks. The Swiss began selling in May 2000 and they want to sell a total of 1,300 tons.

    The Russian state gold reserves, not counting gold involved in swap operations, grew to 424.2 tons by April 2002, which is 10.9 tons, or 2.6% more than in December 2001. Gold as a share of reserves is 11% versus 9.8% in 12/2001.

    Now that the entire world has discovered the dollar and the current account balance is too high the dollar is finally going to fall. We wrote about this last August, October and January. Once the dollar corrects 10-20% gold will go through the roof, and the whole derivative scam will explode.

    As the derivative disaster waits in the wings the results of monetary and economic corruption bear down on all markets. If the dollar drops more than 25% there could be a move to make the euro the international benchmark currency or gold could fill that void.

    As soon as real estate breaks down decisively the debt bomb will explode and unsustainable debt will bring on severe recession or depression.

    As we said in April 2000 when we called the top of the stock market, the writing was on the wall. This time the revaluation of gold will be permanent at some higher level. Gold production will decline over the next five years and as the recession presses on monetary stimulus will be used with abandon. Instead of inflation we'll have deflation and no matter how many aggregates they throw into the system it won't work. We'll end up like the Japanese caught in a liquidity trap. Even at $350 per ounce gold new projects will take a minimum of three years to reach production. Three of the biggest gold mining companies are hedged forward in a big way. If they don't buy those hedges back soon they might be out of business. Who knows what will happen to JP Morgan Chase, Citigroup and Goldman Sachs the major shorts in the gold cartel manipulation group. If just one of them goes down it will take them all down. If that happens gold would move into the stratosphere. As we said two years ago the leasing, sales and hedges equal 15,000 to 29,000 tons of gold. We'll stick with that and if it is so the upside on the gold price will be unstoppable. The flip side is that as the dollar depreciates against other currencies then sovereign reserves will take major losses. Foreign central banks have about 75% of their reserves in dollars. That will accelerate recession into depression. Central banks could also scramble to be gold buyers as the price moves higher. Citizens are not going to be happy, to say the least, when they find out part or all of their gold is gone. The strong dollar is history and foreigners who hold $6.5 trillion in US assets, including almost 40% of US Treasury debt will be pulling assets out of the US. That is why the FTSE, DAX & CAC have held up so well as of late. There is dis-intermediation going on, that is assets are moving from one place to another. The mania is over, Goldilocks has disappeared and the just right endless prosperity is over. It s now time to face reality and massive debt. There is no recovery. It was all another lie by government and Wall Street.

    Soon free trade will be history. You will see the collapse of WTO and NAFTA. The dreams of the new world order are going to be dashed. The new paradigm was simply another lie. Those 35 times P/E ratios are about to become 14.5 times or less. Once gold breaks about $340 an ounce a tectonic shift will take place. We'll begin Phase-2 of the greatest gold bull market in history.

    You've heard of paradise lost; now we'll add confidence lost. Just wait until JP Morgan Chase's derivative position of $30 trillion goes upside down and the government has to step in. Policy decisions by the Treasury and the Fed, obfuscation and fraud are not going to make the problems go away and manipulating them only makes the situation worse. The elitist inner circle is going to get their heads handed to them in Jacobian fashion. The market fixers and their leader Mr. Greenspan epitomize manipulation and everything that has come to be wrong with markets; the corporatist culture or government regulation. The price of gold is about to bring reality into their lives.

    May 6, 2002

    An international financial, economic, political and social commentary.
    Published and Edited by: Bob Chapman
    Robert Chapman [email protected]

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