You are here
Russian central bank stops supporting dollar
12:53p ET Saturday, October 23, 2004
Dear Friend of GATA and Gold:
The November issue of Financial Insights, the newsletter
of Dr. Richard S. Appel, provides an excellent overview
of the real gold market and recognizes GATA's work.
Appel has generously granted permission for a large part
of his November issue to be shared with you here, so it
is appended.
Financial Insights discusses gold, the financial markets,
and junior resource stocks believed to offer great price
appreciation potential. Previous isues of Financial
Insights are available at its Internet site along with a
list of the stocks recommended by the newsletter, a
biography of Appel, and information about a special
subscription offer.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Gold and Gold Stocks
Appear Ready to Soar
By Dr. Richard S. Appel
Financial Insights, November 2004
www.financialinsights.org
Much has occurred during the past few months that
drew me to the conclusion that gold and gold equities
are approaching a period when they will shortly
resume their secular bull market advances. I have
recognized and discussed during this time my belief
that the gold price would be under pressure until after
the upcoming presidential election. Further, it has
been my contention that no effort would be spared to
maintain orderly stock, bond, and gold markets, in
order to help the incumbent remain in office.
During the past few years I noted some of the
strange gold price actions that occurred,
comparisons to which I had not witnessed across
my nearly 40 years of studying the gold and gold
equities markets. Importantly, some of these unusual
occurrences became quite commonplace in the last
two months. After considering their consequences I
am compelled to believe that sharply higher gold and
gold share prices are likely awaiting us just around
the corner.
It is my conviction that our leaders desire to control
an orderly gold price rise as its secular bull market
unfolds. They are not so much concerned if gold
moves higher but rather about how its advances play
out. They realize that gold will advance as a result of
their actions, but they desire to prevent the public
from recognizing it for as long as possible.
For new readers, the reason that politicians shun
gold is because it acts as a barometer whose price
action announces how a government is handling
their country's fiscal and monetary affairs. When a
nation is acting prudently, their monetary unit is
stable on world markets, as are their domestic prices.
Under such conditions, the gold price tends to find a
level from which it does not greatly deviate.
When most countries maintained a gold standard, the
last vestige of which ended in 1971, the noble metal
acted to limit a government's propensity toward
excessive monetary creation. Our leaders could
issue dollars only if they had sufficient gold with which
to redeem them. This forced those in power to live
within their means. They could not spend more than
they acquired through taxation.
However, when a nation state acts irresponsibly and
overspends their tax receipts creating fiscal deficits,
it drives its balance of payments into negative territory,
and both their currency's worth on world markets and
its local purchasing power falls. During such times
gold senses that the currency is destined to decline
and will rise in anticipation of that event. This is the
real reason that gold, despite all of the negative
rhetoric that abounds, has been plodding higher in
price. Do not forget it has already risen 65 percent
since it posted its 2001 bottom, with neither the
awareness nor participation of the public.
Since the birth of civilization gold has been coveted
by man. It was one of the first forms of money and,
once recognized for its eternal value, has been used
by virtually all civilizations as their primary form of
money. If we were able to go back in time for 60 or
more years, you would find that it was the prime,
universal item used as money.
The reason that it achieved this lofty state, and
maintained it for several millennia, was due to the
fact that its use forced politicians to be honest
regarding their issuance of paper money substitutes.
Each time a country deviated from exclusively using
gold and issued paper currency in its stead, their
leaders began to debase their money at an escalating
pace. In all cases, this did not end until the banknotes
finally became worthless or nearly so. The only
question was how long it took.
This is the reason behind the old French adage that
"even the poorest French peasant hides gold under his
mattress." It was the result of the repeated currency
changes that France's citizens were forced to endure.
These were due to their government's destruction of
each new currency that they issued, to replace the
earlier ones that they had inflated to
near-worthlessness.
I digressed again. A number of unusual events have
repeatedly occurred in the gold market for at least the
past few years. These go against all of my experience
following the gold market, as well as the laws of
probability.
First, gold has rarely traded higher than $6 on any given
day. Each time that it begins a session sharply higher
or trades to this level above its previous closing price,
a substantial amount of selling has appeared. Bill Murphy,
chairman of the Gold Anti-trust Action Committee (GATA),
was the first person to note these incredible recurring
incidents. I had sensed that something was wrong for quite
some time prior to his observation, but it was his
bringing it to my attention that stopped me in my tracks.
Murphy rightly pointed out that this action has helped
prevent drawing attention to gold after it began its
tortuous rising and bullish path in 2001.
Second, often when the great metal was either leaving
a base or when it suddenly shot higher it would meet a
wall of selling. The last several days are a good example.
Gold, after trading just over $6 above the prior day's close
last Friday, was not only stopped dead in its tracks but
moved sideways on Monday, only to be whacked on the
following day when it gapped down $6, before posting a
$7 loss.
In the old days, when gold exhibited an explosive breakout
or a sharp runup, the momentum typically followed through
for at least several days before a setback occurred. Now,
almost like clockwork, whenever gold trades strongly,
higher selling mounts, and the wind is immediately taken
out of its sails.
Still another repetitive telltale trading pattern has been
in force. This time it involves the action of the HUI, the
Amex Gold Bugs Index. In the past the HUI and its
precursor, the XAU, the Philadelphia Gold & Silver
Index, often reversed direction prior to the yellow metal
at major turning points, during extended gold advances
or declines. Gold and the major producers normally
move in tandem. However, the past two or more years
have seen the HUI reverse course on any given day
while gold was moving strongly higher. With few
exceptions, the following day gold was hit for a
substantial and often a prolonged string of losing
sessions.
Some observers have commented that this action might
be the result of information leaking of a forthcoming
attack on gold. Whatever the reason, it has often
signaled an impending downdraft in gold's price.
I am bringing these extraordinary events to your attention
because the regularity of these strange and recurring
anomalies have greatly increased during the past few
months. I believe that the reason for this condition is
the fact that buyers of the yellow metal have become
more aggressive, and thus the need to overwhelm
these gold-positive forces has similarly risen. This, in
order to prevent a near-term, sharply higher price.
I realize that many readers are quite skeptical of my
above claims and statements. I am not asking you to
believe me. However, I suggest that, for your own sake,
you keep an open mind and try to more closely follow
the daily price movements of gold and the HUI. It will
be easy enough to draw your own conclusions. But
again, you must be open-minded and try to believe
what you see and ignore all the negative gold rhetoric
that fills the airways.
If I am correct, you will have sufficient time as gold's
great secular bull market unfolds to confirm or refute
my observations. This will allow you to determine for
yourself if either the cited abnormal events are a
coincidence, or if official actions or statements occur
at times when gold is soaring and are used to control
its advance.
In any event, I believe that anyone interested in the
gold complex should closely focus on the trading
relationship between gold and the HUI. Further, you
should use caution whenever a deviation from the
norm such as I have described presents itself.
If you invest in gold, it is imperative for you to attempt
to get a feel for the gold market. You should at least
follow the daily closing prices of gold and the HUI and
compare them with earlier ones. I believe that this is
best done in real terms, not in percentages.
For example, if gold posts consecutive closes of $420,
$416, $418, $416.50, $417, and $415.50, you can sense
that it is trending downward, albeit slightly. However, if
you work in percentage terms you have no reference
point from which to judge its underlying direction. All
you know is that it was down 1 percent, up 0.5 percent,
down 0.4 percent, up 0.2 percent, etc. You will lose all
sense of its trend. If you use this method in following all
your markets I believe that you will develop a better
grasp of their primary trends.
An advance in gold is the determining factor that will
influence the price movements of both the major
producers and the junior exploration companies. I
believe that we are on the cusp of a substantial
increase in gold's price which will drive it to test the
$500 level. I do not know if the precious metal can
muster sufficient buying power to propel it to a new
high prior to the election. However, once the need to
strenuously restrain its advance no longer exists, I
feel that it will break free of its shackles and surprise
most onlookers with a burst of strength.
I suspect that November will be attended with a new
bull market high. Precise timing was never my forte,
and we may have longer to wait. Yet, given what
appears to be a far greater magnitude of effort
necessary to constrain its price, it is likely that it
will literally evaporate when the last presidential vote
is cast.
My only potential caveat is that a number of gold
enthusiasts are predicting a similar scenario. This
gives me some pause because I prefer gold breakouts
that are anticipated by as few investors as possible.
However, I doubt if all of we pundits combined have
as much influence as the worldwide audience that gold
appears to be finally attracting.
The gold-producing companies, as viewed through
the action of the HUI, struck their lows in May. I
believe that they will join and make new highs along
with gold. They have completed their bases and
await a breakout to new high levels before they will
really roar. The HUI is trading at 227.47 and its bull
market peak is $258.60. Additionally, its 50-day
moving average just rose above its 200-day average.
They are 208.38 and 207.23 respectively. Thus the
HUI's moving average study has turned bullish,
which is a major plus.
The junior sector is becoming quite interesting to me
at present. After sustaining substantial losses during
the springtime, the juniors bottomed around July.
From their lows, most companies moved higher and
many of them developed defined upward trends. It
appears to me that most of the better companies
have cleaned up their markets; they have absorbed
all the cheap stock sold by the weak holders. This
being said, I believe that they too are poised to move
sharply higher along with gold.
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
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 site:
http://www.lemetropolecafe.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
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled "GATA."
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
