gold - "the anti-dollar"

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    "Newmont Chief Sees Gold Future

    By Al Lewis
    Business Editor, Denver Post
    Sunday, August 31, 2003 http://www.denverpost.com/Stories/0,1413,36~130~1600280,00.html

    Newmont Mining president Pierre Lassonde forks over a
    $1 million bill. Visually, it's as impressive as any U.S.
    currency. It's even meticulously printed on similar paper.

    On the back is a small inscription: "This certificate is
    backed and secured only by confidence in the American
    Dream."

    The line on the novelty note comes off as a joke. But
    Nixon uncoupled the dollar from gold in 1971, so maybe
    it isn't so funny.

    Lassonde smiles. We spoke last week after a weakening
    dollar put gold at a six-month high.

    Gold appears to be rebounding from a 20-year bear market
    that began with a war on inflation in the 1980s and ended
    with a war on terrorism and a loose fiscal policy that is now
    flooding the world with dollars.

    Gold was $35 an ounce in 1970, peaked at $850 in 1980 and
    from there to nearly $250 in 1999. It's still bouncing around,
    but last week it was on the upswing at $375.

    Newmont is rising with the tide, its stock up more than 200
    percent since October 2000.

    Lassonde, who has 60 percent of his net worth in gold-related
    investments, doesn't believe his luck ends here. As the
    author of "Gold Book, The Complete Investment Guide to
    Precious Metals," he can argue why gold might one day
    climb to $6,500 an ounce.

    His arguments, though bold, are compelling -- even bearing
    in mind that he has every incentive to preach a bullish
    theology and that many financial experts believe average
    investors should put no more than 5 percent of their portfolio
    in gold.

    "I call gold the anti-dollar," Lassonde said. "When the dollar
    is strong and acts as the reserve currency that it is, there is
    no use for gold. But when the dollar is weak because of fiscal
    and monetary policy, then the ultimate reserve currency is
    gold."

    So with a rising U.S. trade deficit and a federal budget
    deficit that is financed with a steady flow of foreign cash,
    gold is behaving more like a currency than a commodity
    in Lassonde's view.

    "The United States is sucking up 70 percent of the world's
    savings to live in the manner it's accustomed to," Lassonde
    said "This can't go on forever."

    To be sure, the global politics of the American lifestyle, the
    intricacies of central bank policies, currency fluctuations
    and geopolitical events are impossible to predict. Also, a
    strengthening economy has the potential to turn the tide
    against gold.

    But if you put these factors aside and consider gold as
    just a commodity, Lassonde has some more basic
    supply-and-demand arguments, too.

    The 20-year bear market in gold has weeded out marginal
    gold producers and significantly curbed exploration and
    production.

    "If gold was $1,000 an ounce, it still takes four to seven
    years to open a mine," he said.

    Then, on the demand side, there is India and China.

    India, home to a billion people, is increasingly affluent,
    particularly as U.S. companies add jobs there instead of
    here. So Indians are buying more gold.

    Then there's China, where after years of communist
    controls, the government is deregulating gold, allowing
    gold companies to have initial public stock offerings,
    creating a gold exchange and even allowing its citizens
    to buy gold at market rates.

    That's 1.3 billion people who now are permitted to buy
    gold at market rates as they participate in their
    fast-growing economy.

    "China by itself could become 40 percent of the entire
    gold market," Lassonde said. "That is the most
    important thing that's happened to the gold market in
    the last five years, and yet very few people have
    picked up on it."

    A golden opportunity? Only time will tell, but it's an
    interesting thesis. Meanwhile, know that the lure of
    gold has made many millionaires and many paupers."
 
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