Taylor On Gold
HOW MUCH LONGER CAN THE TREASURY SELL GOLD?
HOW MUCH LONGER CAN THE U.S. DOLLAR LIE BE MAINTAINED?
You could make the case as Doug Casey does, that America and other
governments should sell all their gold so that a true free market for gold
could evolve. That would be ok with me too, if such a decision were made in
the light of day and if our elected Representatives had a chance to vote on
it. The last time I checked our government officials have been claiming
that we still do operate under a form of democracy.
Yet there is every reason to believe that our government is behaving more
like a dictatorship than a democratic republic, judging by the behavior of
the U.S. Treasury and the Exchange Stabilization Fund.
For example, as discussed recently in this hotline message, it seems as
though the Clinton Administration may have clandestinely sold as much as
20% of the American gold supply without Americans or Congress knowing
anything about it. This it seems likely was achieved by way of a swap
transacted by the Exchange Stabilization Fund (ESF), which since the days
of FDR can be secretly carried out with no one but the President &
Secretary of the Treasury being aware of it. But, given that gold underpins
and strengthens our currency, you would think in a democracy the American
people should have some say about this issue. Apparently the elite bankers
who in fact call the shots that really matter in America, think
differently. Some democracy we live in!
As noted in recent issues of "J Taylor's Gold & Technology Stocks," there
is reason to think Clinton and Summers may have swapped 20% of the U.S.
gold supply to Germany so that 1,700 tonnes formerly owned by the U.S. and
still stored at West Point is now owned by the Germans. This it seems made
it possible for the Germans to sell the remaining 1/2 of the gold the used
to hold after they sent the other half to support the EURO.
Why would the ESF do that? There may be several reasons, but one of the
most obvious would be in order to reverse big losses the ESF was suffering
at the time of the Washington Agreement. It seems as though Clinton was
caught off guard by the sudden decision of the Europeans to stop selling
gold. And with an annual short fall of new supply derived from mining
activities each year amounting to about 1,500 tonnes, unless a new supply
of gold was found and found quickly, the fundamentals of the gold markets
would result in a surging price for gold.
But it was not only the ESF that most likely prompted this clandestine
action. If the gold price were allowed to continue to rise, it would
almost certainly expose the naked truth to the world about the dollar,
namely that it was then and is now even a more over valued currency. What
would happen to the U.S. dollar and global markets if the notion of
productivity gains, which according to Alan Greenspan, Bob Rubin and Larry
Summers justified high dollar and stock market valuations, were seen for
the mirage they are? Would the dollar not plunge back to earth and the
global markets with it?
The answer to that question is "not if you can emasculate the one currency
in the world that is superior to all paper currencies." If gold can be
manipulated to keep its price depressed, then you could explain the strong
dollar exactly as the Bush people are now explaining it and that is to
simply say the dollar isn't strong, it is simply less weak than other
currencies." And if you could keep gold depressed, then the lemming like
mentality of the masses will not result in a flight to quality - from paper
trash to real money, namely gold. If CONfidence can be maintained in paper,
the banks can keep on printing and the great dollar and American stock
market lie could be kept afloat a while longer. Or from Clinton's vantage
point, at least it could be kept in place until his time as President had
expired.
So, How much Longer can the Dollar Con Job Continue?
There are several possible answers to this question. It could last for
another four years, assuming the U.S. has clandestinely sold 20% of its
gold by way of a swap aimed at disguising that transaction. We believe the
annul gold shortfall from mine production to meet global demand is around
1,500 tonnes. Assuming other countries are not willing to sell more gold as
per the Washington agreement, the U.S. could meet this shortfall for
perhaps another four years.
Of course, there are companies like Barrick who some think is a knowing
accomplice to the gold market manipulation scheme. Its recent acquisition
of Homestake, which has not sold much of its gold forward, may provide
another source of supply for the banker/government cabal to use to continue
trashing gold. The ability of the Homestake production to be sold forward
could buy the ESF a little more time to continue its dollar con game and in
so doing contribute to the impending poverty of millions of Americans and
billions of the world's citizens.
Hope Springs Eternal
Hope springs eternal with some of us gold bugs. We would like to think that
either the markets will somehow begin to understand that something is amiss with respect to the American gold supply. We would like to think that
American liberty and the rule of law might actually still be at least partly in play in America so that Reginald Howe's lawsuit will finally be heard. Yet I need only recall a remark made by the CEO of a small Wall Street commodity trading firm a couple of years ago. This person who once worked under Bob Rubin told me in an interview that "The U.S. Government has never given us a reason to doubt its truthfulness." Wow! Forget about
Hollywood fantasies! How about Wall Street fantasies!
This kind of wishful thinking coming from folks who are frequently
interviewed on CNBC goes far in explaining how compelling evidence in
support of GATA's gold manipulation charges can be overlooked and how
Americans have gotten so sucked up into a stock market bubble that is now
in the early stages of a devastating implosion. When I hear these kinds of
remarks, I hold little hope that Wall Street will, on its own come to its
senses before it is forced to do so.
Which leads me to a third possible answer to my question about when the
gold manipulation scheme might end. Unfortunately, I believe it is likely
to end with the Kondratieff winter and the end of the fourth Kondratieff
cycle since 1798. As regular subscribers to "J Taylor's Gold & Technology
Stocks" are aware, we believe the Kondratieff winter will lay bare all the
lies and myths of the dollar and U.S. markets. However these market
distortions will be revealed only by way of a devastating depression.
Indeed as opined above by Dr. Kurt Richebacher, there are signs that
control of markets is now being lost by Alan Greenspan. So it seems
entirely possible if not likely to us that the laws of physics may soon
overcome all the manipulation and con artistry so well perfected by
Washington spin masters. In fact, we think the dollar may be about to
crash under it own weight. There have simply been too many dollars printed
and in the process of printing a fiat currency it can only be achieved by
increasing debt at an increasing rate in relation to GDP as the Kondratieff
cycle matures.
In addition, increasing debt leads to increased debt servicing requirements, which commands an increasing claim against national income. And this takes place at the same time that sharply decreasing earnings and national income results from mal investments that took place during the promiscuous creation of money during the financial money-creating orgy that we have just lived through. Combine declining income with surging debt service requirements and suddenly folks begin to seek liquidity. They stop spending in mass, which leads to still more decline in income. The vicious cycle of depression has begun! Unfortunately this is the Kondratieff winter that I believe we may now be entering.
The fact is however, that this kind of devastation has always taken place
with fiat currencies, which governments and the banks that control them
force upon society for their own personal and selfish gain. The ending is
devastating.
Perhaps these notions, which arise out of the Austrian school of economics
are wrong. Or perhaps we will wiggle through this downturn one more time.
We pray that would be true. But increasingly this does not seem possible to
me. Of all the explanations for what is going on today, the Austrians seem
to make the most sense from my perspective. The laws of physics cannot be
defied indefinitely and as Richebacher points out, there are signs that the
system is beginning to crack.
Promising gold stocks
GOLDCORP INC (NYSE - GG - $10.81) - This is one of those rare gold
producers that can produce healthy profits despite our authorities
manipulating the price of the yellow metal to ever declining levels. During
the second quarter of this year, the company produced 161,261 ounces at $87 per ounce, mostly because of its Red Lake project which continues its
outstanding performance.
Earnings for the period were $15.3 million or $0.19 per share. The company
is paying an annual dividend of $0.10 per share.
Production next year is expected to increase to 475,000 ounces, up from a
projected 440,000 this year. The cash cost is expected to decline to less
than $70 per ounce. The company is also recalculating its reserves. In
light of the fact that average grades have consistently been higher than
previously announced, management believes reserves may in fact be larger
than what has been announced to date.
NOVA GOLD RESEOURCES (CDNX - NRI - $0.53) This has been our best
performing gold mining stock by far this year. With it closing last year at
a paltry $0.09, and with it selling at $0.53 at the end of this past week
it has gained 490%. It is largely responsible for our overall mining sector
gaining nearly 25% this year.
Last week the company announced that it has signed a final formal agreement with Place Dome US Inc. and Calista Corporation to acquire a 70% interest in the 13 million ounce Donlin Creek gold deposit. For reasons outlined previously, including ongoing cash flows accruing to this company from sources other than gold mining, this continues to be a favorite gold mining issue on our list. I plan to provide more thoughts about this company and other non producing gold mining firms in the August issue of J Taylor's
Gold & Technology Stocks newsletter which should go to press during the
first week of August.
July 23, 2001
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
http://www.miningstocks.com
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