One from Dallas, the other from San Diego find a meeting of the minds via a French liaison.First of all, we have a bit of a correction underway on February 7, 2006. Gold is down about twenty bucks to the $550 level. Please, not to panic! This is a normal correction in an ongoing bull market. Sit tight. This bull is trying to buck you off because that’s his job. The bull wants to go as high as possible as long as possible with as few people on board as possible. The bear operates in exactly the opposite fashion. This holds true for all the markets but for some reason it is especially true for the gold market. Actually, that reason is because gold is a political metal and competes with fiat currencies. All the rah-rah “paper boys” have no affinity for gold.
Remember also that Helicopter Ben has now officially taken the helm of the Fed and what better statement to try and make than to put a bit of a heel to gold.
You will hear many reasons why gold has been “hit”. It will be anything from a bear market raid, to an improving economy, to a rising dollar, to falling oil prices, to Heaven’s knows what. Just nod and smile because it may be all of the above and a little more or less.
The correction might also be as simple as the fact that it became overextended. No market goes straight up.
However, If you put two and two together when you read the report mentioned below from Cheuvreux, the equity brokerage house of Credit Agricole, the huge French bank, you just might get the impression that someone is doing the “in your face” routine — this is what we think of your report! There is nothing quite as vile to the markets as “one who has turned”. What do you think happened when John Embry came out with his report, Not Free, Not Fair? It is point, counter point and this is their counterpoint.
Unfortunately, “they” are on the wrong side of the primary trend so there are still a good many shorts trapped and looking for an exit. Big money has a way of waiting things out and when the time is right, darting for the exits—even if they have to create the exits themselves. And incidentally, do read the report that basically endorses what GATA and Embry have previously stated. The truth is a fire that spreads exponentially and try as they might huff and puff, the little, well—the little huffers and puffers cannot put it out.
This correction is not going to last; it is not a reversal of the primary trend. Don’t be spooked into giving up your mining and resource shares and whatever you do, don’t give up your physical gold and silver. I fully realize that most of you are on top of your game but there may be some new to this exercise who will want to bolt because the downward draft feels strong enough to mess up Jimmy Johnson’s silvery locks.
Again, please not to panic. There is always that sinking feeling in the pit of your stomach when you see gold and silver down like this. But it also might be the time to pick up a few bargains if you have the cash to do so. This correction may last a few days and then again it may not. No one knows for sure. If you’re not a trader, and if you’re not on margin, (and you don’t want to be a trader or on margin in this market), you’ll be just fine.
I am but a footnote in this missive, but listen up folks.
As many of you know, for several years, I’ve been beating the drum for Richard Russell and for GATA headed up by Bill Murphy and Chris Powell. (Please review A 2005 Gift for the Gold Community in my archives on www.GoldSeek.com ). For Richard to post the message below on his site (www.dowtheoryletters.com) has to be satisfying for Mr. Murphy who has been ignored and at times vilified by the mainstream press for so many years. Not that Richard Russell is mainstream press by any means, but he is certainly highly respected press.
Well, Bill, Chris, Rege, et al, you’re ignored no more.
I’ve had exchanges with Bill and to some extent Richard, over the years and it’s gratifying to see that the circle is becoming tighter in one sense and broader in another. Both of these men are principled, incredibly bright, and persevering. Their styles are as different as night and day. Even though both have subscription based newsletters (www.dowtheoryletters.com – Richard and www.lemetropolecafe.com – Bill) both of them have major streaks of altruism blended with a genuine desire to see their fellow human beings prosper both financially and through personal growth. Both have their own style but it is never a case of style over substance. The substance has always been there—we just have to take the time to listen, grasshopper! As an aside and in all fairness, I would be remiss if I did not include Jim Sinclair (www.jsmineset.com) in this select group, who has also has much vested in assisting others in individual growth.
It feels to me like it’s coming full circle. The Gold Anti Trust Action committee is receiving recognition from one of the stalwarts of the investing community. In turn, Richard Russell who has been banging the drum loudly for gold and the fact that it represents real wealth is picking up the torch and carrying it forward, much as the Olympic flame is currently being transported across the Swiss Alps on the way to Torino, Italy. It has not been an easy journey for “the torch” and just as many people have given tirelessly and selflessly of themselves for years to make this journey happen, so too, have these gentlemen given tirelessly of themselves to make this world a more honest place. All three have carried “the torch” for the gold community and have given it support when it was needed the most. And should you hear otherwise, these gentlemen are True Patriots of America and have spoken out far in advance of the maddening crowd. They’ve all addressed the issue that a country is only as strong as its currency. Debase the currency and you debase your country. Create and perpetuate a strong currency and your country will grow strong, all other constitutional items being honored and equal.
In that quest for honesty and truth, both in economics and in the concept of money, they have “suffered the slings and arrows of outrageous fortune” —they have been “the pair of ragged claws scuttling across the floors of silent seas.” They know only too well.
Now for the main event from Richard Russell’s column:
MANCHESTER, Conn.–(BUSINESS WIRE)–Feb. 2, 2006–Cheuvreux, the equity brokerage house of Credit Agricole, the huge French bank, this week distributed a 56-page report that completely endorses in detail the findings of the Gold Anti-Trust Action Committee that the price of gold has been surreptitiously suppressed by Western central banks and that those banks do not have the gold they claim to have.
The report, written by Cheuvreux’s mining sector analyst in London, Paul Mylchreest, is titled “Remonetization of Gold: Start Hoarding.” It repeatedly cites GATA by name and foresees an “unprecedented” rise in the gold price, possibly accompanied by a spike to as much as USD2,000.
The report’s executive summary says:
“We are raising our mid-cycle gold price estimate to USD900/oz from USD750/oz and see the possibility of a spike to USD2,000, or higher. Covert selling (via central bank lending) has artificially depressed the price for a decade.
“Central banks have 10,000-15,000 tonnes of gold less than their officially reported reserves of 31,000. This gold has been lent to bullion banks and their counterparties and has already been sold for jewelry, etc. Non-gold producers account for most and may be unable to cover shorts without causing a spike in the gold price.
“There is a supply deficit in the gold market of around 1,300 tonnes per year before any central bank selling and perhaps 700 tonnes per year after ‘official’ sales but before covert selling. This compares with world gold mine output of only 2,500 tonnes per year. Some central banks, notably Russia, are starting to buy gold.
“Gold acts as an early warning of potential crisis such rising inflationary/deflationary pressures and general confidence in paper currency, especially the U.S. dollar.
A strongly rising gold price could have severe consequences for U.S. monetary policy and the U.S. dollar. History suggests that gold always wins against an inflating paper currency (that is, one subject to excessive supply growth).
“Gold and gold mining stocks are poised for an unprecedented rise in prices and profile. Investors in UK/European equities need to assess the implications for their portfolios. …”
The Cheuvreux/Credit Agricole report details GATA’s findings in Chapter IV, “Analysis of the Gold Market,” and concurs in them as “broadly correct.”
“No financial house in Europe could be more part of the establishment than Credit Agricole,” GATA Chairman Bill Murphy said today, “and now its endorsement of GATA is circulating among other big financial houses in Europe and around the world.
“This evokes what Adam Fleming, former chairman of Harmony Gold, now chairman of Wits Gold, said at GATA’s Gold Rush 21 conference in Dawson City, Yukon Territory, Canada, last August, just hours before the current sharp rally in gold began: that just a little investment demand could take the central banks out of their gold ‘in the blink of an eye.’
“A LITTLE investment demand? Credit Agricole’s brokerage house has just declared: Start hoarding!”
Gold Rush 21, Murphy said, “was truly historic and decisive. It gathered the world’s top experts on gold to spell out, explain, and publicize the gold price suppression scheme, and the conference issued the Dawson Declaration, an appeal for free markets in the precious metals as a matter of basic human rights.”
A two-DVD set of the proceedings of the Gold Rush 21 conference, including a dramatic 25-minute video summarizing the conference, produced by the brilliant Vancouver videographer Trevor Johnston, can be obtained through this Internet link: www.goldrush21.com
The Cheuvreux report on the gold market can be obtained at GATA’s main Internet site here:
http://www.gata.org/CheuvreuxGoldReport.pdf
“As for gold itself,” Murphy said, “you can get some from coin and bullion dealers, but as the Cheuvreux report gets around, there may not be much left.”
Until next time,
D. Stewart Armstrong
Posted by D.Stewart Armstrong in Articles