Gold has passed his testing point but Elliott Waver Prechter still disses it

8:50p ET Sunday, January 11, 2004

Dear Friend of GATA and Gold:

Michael Kosares, proprietor of Centennial Precious Metals
in Denver and the generous host of the forum at CPM's
Internet site, www.USAGold.com, has just written
brilliantly about Bundebank President Ernst Welteke's
obsession with the disposal of Germany's national
patrimony. Kosares' observations, posted at the USAGold
Forum, are appended here with kind permission.

If you like what you read, you may want to check
USAGold's daily gold commentary, which Kosares has
resumed writing, here:

a href=http://www.usagold.com/DailyQuotes.htmlhttp://www.usagold.com/DailyQuote...

Thanks to our friends who located the Internet link
to the Bild am Sonntag story about Welteke's latest
ideas for impoverishing his country in favor of private
financial institutions:

a href=http://www.bild.t-online.de/BTO/news/2004/01/11/gold/gold.htmlhttp://www...

Of course the story won't make much sense to you
if you can't read German, but you still can explore
the rest of that racy newspaper and check out the
beautiful girls who hang out there in abundance,
each a reason to learn a new language -- and, perhaps,
to hold on tight to your gold.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Why Is Welteke Obsessed With
Selling Germany's Gold Reserves?

By Michael Kosares, Proprietor
Centennial Precious Metals, Denver
a href=http://www.usagold.comhttp://www.usagold.com/a

The earliest reference I could find to Bundesbank President
Ernst Welteke's obsession with gold sales was in February
2002, when The Privateer newsletter quoted Welteke saying
that the Bundesbank should sell gold and reinvest the
proceeds so that the interest could be used to repay the
German national debt.

In March 2002 Welteke was guoted by the German newspaper
Der Tagesspiegel as saying that the Bundesbank should sell
gold to help finance public infrastructure work.

In April 2002 Welteke was quoted by Agence France-Presse
as saying that the Bundesbank should sell gold to invest in
blue-chip shares and shares listed on the Euro-stoxx-50.

In September 2002 Virtual Metals' quot;Gold, Energy amp;
Commoditiesquot; letter reported that Welteke had suggested that
Germany's gold reserves be sold to provide relief for victims
of natural catastrophes, like the floods that had ravaged
Germany and central Europe that summer.

I also recall but cannot document that at some point after
February 2002 Welteke suggested selling Bundesbank gold to
provide funds for environmental cleanup.

Now the German newspaper Bild am Sonntag reports that
Welteke would like the Bundesbank to sell gold to promote
education and research.

To what do we owe Welteke's irritating obsession with
getting rid of the Bundesbank's gold?

One would think that, given enough time, he might entice
every possible consituency in Germany with what could be
done with the proceeds from the sale of the German people's
gold.

It has been speculated that the real reason for selling the
Bundesbank's gold has little to do with any of the above but
rather with the long-forgotten merger between Bankers Trust
of New York and Deutschebank years ago -- a merger in which
the obligation of a gold loan worth an estimated $10 billion
was passed from the United States to Germany.

That obligation may have become a sine qua non for the
German national bank. Those old gold loans have to be repaid,
assuming that they haven't been already. They are owed to
some other central bank somewhere in this gold-starved world.
And in a world where gold in any size is the object of much
competition (if it's available at all), a central banker must
secure the asset where he finds it.

Why else would someone come up with so many questionable
reasons to sell Germany's patrimony?

As lender of last resort, a central bank has bailout obligations
for gold loans as well as loans for the sort of money you can
print into infinity, and that, I believe, more than anything,
explains Welteke's obsession.

As someone at the USAGold forum pointed out recently, and
as I have said many times, it is not the central bank that
controls its commercial constituency but the other way around.

Given the circumstances, any gold that might be released by the
Bundesbank would be unlikely to see the light of day. Assuming
that the gold involved is actually owed to someone else, it would
be foolhardy for that entity to dump it on the market right now.
I believe that any gold sales by the Bundesbank, if they occur,
will have little effect on the gold market, just as the Bank of
England's and the Swiss government's recent gold sales turned out
to be non-events.

Speaking of national patrimony, I can't help but cite Welteke's
speech to Germany's Monetary Stability Foundation -- of all
groups! -- in December 2002, wherein he quoted the great German
philosopher and playwright, Goethe:

What you have inherited from your fathers
Earn over again for yourselves
In order to possess it.

Welteke offered Goethe's observation in reference to the central
bank's obligation to preserve the national asset structure
through a sound monetary policy. One might conclude from such a
reference that Welteke would be content to let Germany's gold
heritage go at low prices so that German people might have to
earn it back at much higher prices.

Somehow I don't think that's what Goethe had in mind. He most
likely would blanch at such a Faustian bargain.

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Centennial Precious Metals
3033 East 1st Ave.
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Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
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cpm@usagold.com

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