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Fannie Mae admits possible $9 billion loss from derivatives as auditor balks
U.S. Dollar Crisis Could Catapult
Gold Over $600, Dealer Says
By Jim Hawe
Dow Jones Newswires
Monday, November 15, 2004
TOKYO -- The price of gold could surge to levels not
seen since the early 1980s if a big chunk is taken
out of the value of the U.S. dollar in coming years,
one market insider says.
A further devaluation of the greenback by 20-30 percent
would make bullion more attractive as an alternative
store of value and could propel the yellow meta over
$600 a troy ounce, said Michael Kosares, founder and
president of gold firm USAGOLD-Centennial Precious
Metals Inc.
Kosares said crumbling confidence in the U.S. currency
due to America's enormous budget and current-account
deficits has left investors scampering for safe havens
such as gold.
Phones at his Denver-based office have been ringing off
the hook recently and there has been a sharp increase
in requests for gold-investing information packets over
his company's Internet site, he said.
"There has been increased buying by our regular
customers, but also by a lot of first-time investors,"
said Kosares.
These investors have taken note that gold has been
moving higher in a very tight inverse correlation to the
drubbing of the U.S. dollar.
Kosares, author of "The ABCs of Gold Investing:
Protecting Your Wealth through Private Gold
Ownership," said the weak dollar trend will likely
continue for the next four years with the Bush
administration taking an almost benign stance
toward the waning dollar.
"The euro bottomed against the dollar at 82 cents
(October 2000) and has since peaked at around
$1.30, an appreciation of 58 percent. In a similar
manner, gold has risen 72 percent since its
bottom," said Kosares. Gold hit a low of around
$255 in April of 2001, but has been trading just
under $440 in recent sessions.
The Wall Street Journal and Japan's Nikkei Financial
Daily in recent days have both reported what
currency traders have long suspected -- that while the
administration under President George W. Bush
continues to say it favors a "strong dollar," it is happy
to let the greenback fall. Barring increased U.S. saving
or decreased consumption, a weaker dollar is one of
the few remedies for the country's current-account gap.
The Nikkei report, in line with many economists'
estimates, concluded the dollar would need to fall by
20-30 percent to halve the ratio of the U.S. current
account deficit to the gross domestic product -- now
near 6 percent.
This is the same 20-30 percent devaluation Kosares
said could kick gold over $600.
In addition to the flagging U.S. currency, Kosares said
market supply and demand fundamentals also offer
some compelling reasons to get into gold.
One of the most promising developments has been the
trend among mining companies to close out their hedge
positions.
As gold prices fell during the 1990s, mining firms
aggressively hedged some of their gold, essentially
locking in fixed prices for a portion of their future
production.
However, this strategy backfires when gold prices are
on the rise as miners are still forced to sell the hedged
portion at the promised prices.
This trend reversed from around 2001 as miners began
actively dehedging, or buying back hedged gold, to give
themselves greater exposure to the suddenly rising
spot prices.
Kosares described the huge swing in hedging to
dehedging as the "backbone of the current gold bull
market."
And this trend is expected to continue. A GFMS report
out last week stated that the global hedge book is still
saddled with around 60.4 million ounces, or 1,877 tons,
which is equivalent to 75 percent of annual mine
production. Kosares said this figure could actually be
more than 2,000 tons.
Kosares said he believes miners will keep buying back
their hedged gold in what he says will be like "having
built-in market support for the next five years."
Looking ahead, Kosares said gold could be sitting in
the $460s by the end of the year, with a move over
$500 in 2005. A foray over $550 and even $600 is
possible if the dollar loses another 20-30 percent.
Gold opened Monday in Sydney at $437.20,
compared with $437.85.
So just how much gold should investors be stuffing
into their portfolios? Kosares said the commonly cited
5 percent weighting may be too small in light of the
current environment and suggests placing 10 percent
of one's portfolio in gold.
"Gold isn't so much an investment as it is a type of
savings or insurance against currency devaluation,"
he said. "I think if you look at an investment pyramid
you would have savings at the bottom and I think gold
should be a part of that savings."
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RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kuik.com/KH/KH.html
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com/
Subscription sites:
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http://www.investmentindicators.com/
http://www.interventionalanalysis.com
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
3033 East 1st Ave., Suite 403
Denver, Colorado 80206
www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
----------------------------------------------------
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