Gold Market Forecasts War on Immediate Horizon

June 4, 2001

Gold traders and investors who have wondered aloud in recent months how the yellow metal can possibly mount a sustained rally--an-look so good from a chart perspective-in the face of a rising U.S. and global stock market outlook now may have their answer. The gold market is forecasting war between China and Taiwan-and possibly even North Korea and South Korea-with the United States sandwiched right in the middle. If gold's long and reliable history as a war gauge is any indication, the events in question should occur sometime in 2002.

A number of experts in recent weeks have weighed in on this developing crisis. Lawrence Patterson, editor of Criminal Politics magazine, reports that the United States is facing war in the Pacific within 12-24 months. Writes Patterson, "The China attack will be a massive ballistic missile assault obliterating the Taiwanese military structure with plenty of missile power left over to terrorize the civilian population. The missile attack will be over in three or four hours and the occupation will begin before sunrise on the east coast. By the time Americans reach their work that fateful day, China will have established a complete naval blockade of the island, threatening the United States that its Naval forces face nuclear destruction should it attempt to defend Taiwan. They will not be issuing an idle threat."

Patterson has not been the only observer in recent months to forecast a soon-to-come war with China. According to former Chairman of the Joint Chiefs of Staff, Admiral Thomas Moorer, the U.S. can expect a war with China within 1-2 years. He points out that former president Clinton essentially gave them technology to modernize and advance their military power and that we have given much ground during the Clinton years.

Major General John K. Singlaub, who was fired by former president Jimmy Carter from his Asia-Pacific command, says in an interview with Newsmax.com that "The Chinese considered themselves in the driver's seat since they bought President Clinton years ago, and they got used to it. Now, they're flexing muscle because they've been used to getting their way."

A report from the Monetary & Economic Review states that "The U.S. won't come to Taiwan's defense because they value Los Angeles more than they value Taiwan." These generals are, of course, referring to their missiles pointed at Los Angeles. This long-range capability was arranged by the Clinton administration.

The Monetary & Economic Review also states that Dr. Alexander Nemets and Dr. Thomas Torda, two China experts, both say China is ready to take Taiwan in 2002. They believe China's plans have already put it on a collision course with its neighbors, and a collision course with the U.S.

Improbable? Hardly. The most accurate barometer for a country's 1-2 year outlook is the chart of its prime stock market index. In the case of Taiwan, while other Asian countries (principally China) enjoy bull markets, or at least bear market rallies, Taiwan's stock market sports one of the most pathetic-looking charts of any major country. Take a look at the chart provided here. This chart shows a series of bearish parabolic domes within a steep downward trend over the past two years. This has taken place even as China's stock market has experienced an historic boom. The tale of two destinies, perhaps? You can bank on it.

It is also extremely interesting that China's financial bonanza of the past year has eclipsed the fortunes of most other industrialized countries which mostly suffered huge losses in stock market slides of 2000 and the early part of 2001. Why has China been the only major country to be exempt from the claws of the bear over the past year? Could it be that their equities boom was in large part created and sustained by outside investment flows from nations (and banks) sympathetic to the communist regime and their goals of invading Taiwan and, eventually, the United States? After all, it takes money-and lots of it-to capitalize major military ventures, and China's long-standing and impressive bull market will go far in building up their military and preparing the country for the long rigors and financial hardships of war. The United States' open-armed embracement of so-called "free trade" with China, which has allowed China free reign in dumping cheap goods onto U.S. shores while levying heavy tariffs on American exports, is another way China has been allowed to build up its economy and military at another nation's expense.

Most frightening, China, of all nations, is by far the most equipped to deal with a protracted military campaign at this point in time. The U.S. has allowed its military to fall into a decrepit state in recent years and is surely no much for the Big Red Menace. Case in point.: We have been informed through news accounts that Russia-China's ally-has sold China advanced surface skimming missiles which can be nuclear tipped and for which the United States has no defense.

The ugliest constellation of unfolding events, according to Patterson, would be that the North Koreans would join in the battle for Taiwan by invading South Korea. As Patterson points out, the U.S. has no troops in Taiwan, therefore there would be a possibility to remain out of the conflict were it not for some 40,000 troops the U.S. has stationed in Korea. Thus, in all probability, the U.S. will have no choice but to be drawn into a massive new conflagration in South Korea-resulting perhaps in the loss of as many as 100,000 American men and women.

Moreover, Human Events reports that American-based defense contractor Lockheed Martin, which received more U.S. tax dollars last year than any other U.S. defense contractor, has built a naval surveillance system for Red China! A Lockheed spokesman was quoted in the article as stating that the company plans on building even more such systems for China in the near future. As well, Boeing Aircraft has done their part to build up the Chinese military. The heads of both of these companies should be tried for treason.

Of more pressing concern to the U.S., Patterson reports that Red China has established a military base in Cuba that has not even been acknowledged by either the Clinton or the Bush Administrations as of this date. He states further that there are plans underway to transfer nuclear tipped missiles to Cuba in order to repeat the exercise of Nikita Khrushchev in 1962.

Contemporaneously, President Clinton issued an order to block construction of a much needed airport at Florida's Homestead Air Force base. This base was devastated by Hurricane Andrew in 1992. Clinton claimed a desire to protect the environment, but in fact, the decision had to do with a covert military operation and treasonous plans for south Florida. Without this commercial airport base, the Air Force cannot continue to utilize the base, as there are no landing facilities available.

"One can only wonder," Patterson writes, "if this has something to do with a treasonous plan to allow an invasion of south Florida to take place utilizing Chinese troops."

Recently, General Dynamics, one of the nation's number one defense contractors, announced plans to acquire Newport News Ship Building. If allowed to be completed, it would mean that General Dynamics has been allowed to acquire so many other companies that it would be the only supplier of submarines and aircraft carriers for the United States military. Worthy of note, Bill Gates became an investor in Newport News Ship Building several months ago.

Observes Patterson: "In recent years we have allowed a merger activity among defense contractors, which is indeed frightening. The concentration of power over our defense system industries in only a few hands is an extremely bad idea and would allow individuals with treasonous intent to enter places of authority in those companies and create havoc and grievous trouble for the United States.

In perhaps another proxy for war, China's latest attempt at gauging the United States' military commitment and political fortitude occurred earlier this week when a U.S. military vessel attempting to make a routine port of call in Hong Kong was denied harboring, the first such denial in the 55 years.. China's premier refused to give an explanation for its actions, stating only that it wasn't "appropriate." Clearly, the U.S. is being tried by China to see what and how much they can get away with before seeing any kind of retaliation. Thus far they must smiling with glee at the docile non-reaction among the U.S. public and its political officials.

Another possible indicator of U.S. public sentiment is the release of the blockbuster movie Pearl Harbor, which was released over Memorial Day weekend with great fanfare. According to press reports, it is the most expensive movie ever made in Hollywood history. Accompanying this film release were a number of Pearl Harbor-related book releases, television programs and a plethora of T.V. and Internet debates about Pearl Harbor, U.S. involvement with past wars, and, most telling, the possibility for future U.S. involvement in wars. Judging by the intense focus the media seem to be giving the war (which it should be pointed out is specifically a case of the U.S. being bombed by a foreign enemy) we cannot help but wonder if perhaps the opinion makers are not taking the public's "temperature" on the issue of war…perhaps even laying the psychological groundwork for the up-coming wars involving Asia. After all, Washington cannot afford another Vietnam experience with U.S. draftees kicking and screaming every step of the way to the slaughter pen of war. This could well represent the early stages of war propaganda. Time will tell.

Patterson offers excellent advice for preparing for this inevitability: "Make sure that your Y2K literature and your supplies [including gold and silver coins] are not dispersed and that they are maintained for your safety. Those who failed to make any preparations for Y2K may be quite smug (they were right all along), but one of these days smug individuals will be proven wrong."

Indeed, America may well have found its next major crisis. Only this one, unlike the previous one, is not a false alarm.

Clif Droke is the editor of the three times weekly Momentum Strategies Report newsletter, published since 1997, which covers U.S. equity markets and various stock sectors, natural resources, money supply and bank credit trends, the dollar and the U.S. economy.  The forecasts are made using a unique proprietary blend of analytical methods involving cycles, internal momentum and moving average systems, as well as investor sentiment.  He is also the author of numerous books, including “2014: America’s Date With Destiny.” You can view all of Clif's books here. For more information visit www.clifdroke.com.

The first use of gold as money occurred around 700 B.C., when Lydian merchants (western Turkey) produced the first coins