Gold rally noted by Thom Calandra

9:11p ET Sunday, March 11, 2001

Dear Friend of GATA and Gold:

GATA member Derek K. Van Artsdalen of San
Antonio, Texas, recalls in the essay below
Buckminster Fuller's discovery of a 22 1/2-year
cycle in metals and relates it to what he sees
as the imminent quot;perfect stormquot; in gold.

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

* * *

By Derek K. Van Artsdalen

I have been bothered lately by one of those mental
frustrations we all have occasionally in which you
know you have a piece of information somewhere
in your memory banks but just can't seem to access
it. For some unknown reason -- due mostly to the
unfathomable workings of the incredible
human/Universal thing we call quot;mindquot; -- a distant
memory began to surface over the past couple of
weeks involving something I read more than 20
years ago in one of Buckminster Fullers amazing
books entitled quot;Critical Path.quot;

I was still in college at Southwest Texas State
University when I read it back in 1981 and had the
privilege to hear a lecture by the old bird himself
just the year before, which was shortly before his
death. quot;Bucky,quot; as he was affectionately called,
was truly one of the 20th century's most brilliant
thinkers, as nearly everyone who is familiar with
his work will agree. You may recall that he was the
inventor of the self-supporting geodesic dome,
among many other things.

Although I was only about 22 at the time and was
far too young to be concerned with such quot;uselessquot;
and quot;mundanequot; things as investing for my future
(God, if only I had known!), for some reason
something Fuller said in the book regarding gold,
and metals in general, stuck in my mind all these
years. (Come to think of it, this may be one of the
only things I learned in college that DID stick!
Probably because I chose to read Fuller's work on
my own -- strictly out of intense interest in the man
-- and not because some professor assigned it.)

Well, to make a long story much longer, I couldn't
stand the cognitive puzzling, so I decided to track
down a copy of the book. I called all around San
Antonio the other day and couldn't find it in any of
the bookstores, but one of the branches of our
public library (ah, the well-spent tax dollar at
work!) had a single copy -- hardback, no less! I
spent an hour or so perusing the sections of the
book listed in the index under quot;goldquot; and finally
found the information my mind so faithfully locked
away more than two decades ago. Why this would
stick in my head during a period of my life when I
had absolutely no interest in the subject of gold I
cannot explain. But perhaps there truly are no
coincidences, and it just may be that the Universe
was simply storing the information away for me
until it was most appropriately brought forth.

Allow me to quote from Fuller's book at this point,
bearing in mind that, with your patience, I will
attempt to show how all this copper-related
information may relate in an amazingly timely
manner to the present gold situation:

* * *

Metals recirculate on a sum-total-of-all-metals-average
every 22 1/2 years....

I was able to arrive at that figure of a 22 1/2-year
metals recirculating cycle in 1936. I was working
for Phelps Dodge Co., which had asked me to give
them some prognostications about the uses of
copper in the future of world industry.

Copper is the most plentiful of the most efficient
electric power production and conduction metals.
World War I was a power-production war. And
copper is the most plentiful of non-sparking metals
and is therefore logically employed in connection
with gunpowder-handling equipment such as the
shells inserted into the gun breeches. Because of
these facts, the demand for copper in 1917 was
epochally great.

Not long before World War I and its huge demand
for copper, copper-ore-to-pure-metal reduction by
the vastly less expensive flotation process and the
also much less expensive electrolytic refining
brought the cost of mining and refining copper so
low that the cash value of the average amounts of
recoverable gold and silver co-occurring with the
copper ... exactly paid for all the mining and
refining of the copper itself. The whole price paid
for copper was profit. The mineowners then
decided to mine only when the prices bid for
copper were at a peak. The prices bid always
peaked in wartime. With World War I over, the
world copper cartel waited and worked for the start
of World War II.

In the 1930s the big copper companies were badly
bothered by the influx of copper into the
marketplace. Up to the time when I came to study
the copper situation, the rates of evolutionary
change were so slow that the mineowners had no
idea that the copper they sold would ever come
back on the market to disturb their price.

By 1936 the copper price controls were completely
challenged by the scrap influx. Phelps Dodge asked
me to do some research on the problem, so I
reviewed all the known, published data of the
metals world. In the metals world very accurate
records are kept about how metals have been and
are now being used. Very profitable publications
are maintained by the affluent metals businesses.
Very accurate inventories exist detailing, for
instance, how much of a given metal is built into
an automobile.

In 1936 there was only about 30 pounds of copper
in each American automobile. Copper is
expensive, and the auto manufacturers try to keep
the use of expensive metals to a minimum.
However, considerable copper is used in a gas
station -- for instance, in all the gas-tank-filling
nozzle equipment -- because it is non-sparking.
You couldn't possibly use a sparking metal such as
steel around gasoline.

I was able to arrive at that previously undiscovered
22 1/2-year recycling figure by very carefully
integrating the total inventory of the in-use
tonnages of metals in all the main categories of
their use -- for instance, the inventoried copper in
all extant buildings, in old roofings, gutterings, and
flashings, brass pipes, and so forth. The total
inventory of copper in old buildings, both business
and residential, is an inventory that becomes
obsolete and is scrapped and recirculated on an
overall average of once every 50 years. Within the
building category copper comes out faster from big
city buildings than from single-family country
residences....

By taking the invention-gestation rates in the
different industries ... we integrate the amount of
copper in each use-category and their respective
number of years of use, and thus find the average
rate at which copper (and all the metals) come back
as scrap every 22 1/2 years.

The unprecedented great World War I copper
production occurred primarily in America. In one
year, 1917, humanity took more copper out of the
ground, refined it, and put it to work than had been
cumulatively produced in all the world throughout
all previously recorded history.

This produced in 1917 a vertical cliff on the
quot;all-history charts of world copper production.quot;
Adding 22 1/2 years to 1917 would bring the date
of reappearance of the crest of the 1917
world-record production scrap to July 1939. So I
told Phelps Dodge in 1936 that three years later, in
July 1939, they were going to be overwhelmed by
scrap.

Meanwhile, I became the science and technology
consultant on the editorial staff of Fortune
magazine in 1938. In July 1939 the head of
research for Phelps Dodge called me up on the
telephone and said, quot;Bucky, your 22 1/2-year
scrap-return prediction is absolutely right. Go
down to the New York docks and observe.quot; I did
so. Alongside all the great cargo ships were cargo
barges filled with scrap metals, piled enormously
high.

Copper is plentiful enough to be trustworthily used
but scarce enough to be used only in the most
efficient manner. Copper is a sensitive metal - the
so-called bellwether of the metals. Whatever
copper does indicates exactly what the other metals
are going to do in the price and production
markets; for instance, steel scrap was also coming
back at exactly the same rate as copper -- 22 1/2
years after production from newly mined ore.

Hoping to protect their anticipated very high prices
when World War II came along, and all unbeknownst to
the general public, all the U.S. metals owners in
1939 were selling all their scrap metal to Germany
and Japan to have it fired back at America two years
later when World War II did come along for the United
States. It was not a moral thing for the scrapmongers
to do. The public had not the slightest idea what was
going on -- the American business public didnt catch
on to the idea of metal-scrap recirculation until long
after World War II was over. The American and world
publics have not as yet caught on to the significance
of recirculating scrap metals....

* * *

First, Fuller does not say that all metals run in
exactly the same cycles, but that they do run in 22
1/2-year cycles in and of themselves. Second, it
should come as no surprise that no period in human
history -- and no significant market, for that matter
-- is free of scoundrels, and the copper market back
then was apparently no exception.

I find it interesting that Fuller singles out copper as
the bellwether metal. Since early 1999, copper has
risen roughly 50 percent. On the other hand, gold
has fallen about 10 percent in the same period.
This is a 60 percent swing, an amount far too great,
in my opinion, to be naturally occurring.

Platinum and palladium have gone through the roof
in that period, while more exotic metals, such as
rhodium, have headed to the moon.

Given Fuller's observations about the metals
cycles, it seems all the more strange that gold and
silver languish to this day in an otherwise robust
metals environment.

The astute reader will note that the last time gold
and silver prices skyrocketed was in late 1979. A
quick addition of Fuller's approximate 22-year
cycle brings us to the present year of 2001 (or
early-to-mid-2002 if we add the extra half-year).
We should note that the extreme supply/demand
imbalance that grew acute in early 1979 and ran
throughout most of the following year actually
started showing signs of arrival as early as the
latter half of 1976. In a quot;normalquot; market cycle, this
pattern is fairly typical. No such precursors are
presently evident in the gold market.

Buy why, if Fuller's assertion of the 22 1/2-year
metals cycle is accurate, have we not seen a similar
gradual increase in the price of gold over the last
year or two? We can assume, I suppose, that those
who actually need the yellow metal in hard,
physical supply (as opposed to paper-based
quot;holdingsquot;) are evidently securing all they need
-- for the moment. There has, apparently, been
enough physical metal available for the past several
years to satisfy the industries that use it.

Given Fuller's scientific assertions above,
however, a reasonable person might begin to
wonder why, at the tail end of what Fuller states is
a completely predictable cycle, gold and silver
prices have not begun to climb along with the
prices of other precious metals. Of course, the
reasons have been well-documented by GATA for
some time now. Still, the evidence presented here
seems to lend ever more credence to the GATA
claim that something is very wrong in Goldville,
especially considering the precarious economic
environment which prevails.

Assuming that the unprecedented high prices paid
for the precious metals in the approximate
12-month period beginning in late-1979 brought
forth unprecedented supply, one can reasonably ask
why the ever-decreasing price and supply of these
same metals in recent years hasn't brought about
the usual result of such occurrences: higher
demand and higher prices. Anyone who has
followed GATA's stream of high-quality
information on this subject over the past couple of
years knows, of course, that gold demand has been
rising steadily - and for several years running. All
the more strange, one would think, that the price of
gold has, for more than three years now, remained
at prices not otherwise seen since -- you guessed it
-- 1979!

As I write this letter from my dwelling in San
Antonio, Texas, it is approaching midnight. And I
can't help but think that, somewhere tonight, there
is a bullion dealer, or perhaps a central banker, or
maybe just a fellow with lots of money and power
and the right connections lying in bed, drifting off
to sleep with a barely perceptible smile of smug
self-satisfaction on his face -- thinking, no doubt,
that he is immune to the forces of truth, that his
cleverness will continue to exempt him from
accountability, that his divine manifest destiny will
continue unabated.

Little does he know of the approaching events
which that expose him for the moral pauper he is.
From the north, the cold, cruel winds of GATA's
mounting case against him are converging on the
warm, clear natural metals cycle moving in from
the south. Together, they are quickly -- and surely
-- preparing to create the loud, thunderous, and
hellish cyclone that will rip his reality asunder
almost overnight. Together, they are forming the
quot;perfect storm.quot;