THE PRICE IN BRIEF

by Philip Judge
1999
(c) copyright 2003
www.anglofareast.com

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With gold in a protracted long term down trend, the questions of it's future as a precious and financial metal, and future pricing are examined.

The gold and silver markets are complex. To understand these markets today we need to understand that there is a campaign or agenda by central banks and the mainstream media to push and hold down the price of gold. This is not a conspiracy theory but purely an observation of fact. When one considers the fragility of our modern day, central bank, fiat (valueless) money system, the motivation behind this "agenda" becomes apparent. Market manipulation is achieved in several ways:

1) MEDIA.
The splattering of "central bank sale announcements" over the media only tell a small part of the story. The financial press never give a full picture, discrediting gold in the minds of investors and the masses. There is less gold mined each year than is used. What is not reported in gold sales "news" is this has been a supply deficit (shortfall) of new mined gold of around 1000 - 1500 TON PER YEAR for more than a decade. Central bank announcements of a few hundred ton here and there make little difference to the chronic short supply of new gold entering the market.

2) PHANTOM SUPPLY.
This already complex market is further clouded by a blizzard of "paper gold" including options, futures and derivatives. Further phantom supply comes from forward selling by producers, financial institutions and investors shorting the market and gold holders leasing (from their reserves) to producers (miners) from their holdings.

3) THE CYCLE.
The lower the price falls the less profitable mining becomes, causing less new gold to enter the market, in-turn leading to a larger supply deficit. To meet quotas producers borrow (lease) from existing reserves. The lower the price falls the more existing gold is leased and less is mined.

4) CENTRAL BANK SALES.
Central bank sales are more hype than fact. Central banks hold 30,000 - 35,000 ton of gold (around 1/4 of the total above ground supply). Despite all the reported "announcements" in recent years, this figure hasn't changed very much. Most central bank gold sales never make the open market - often when one bank sells another bank BUYS. For now the price of gold has continued on its downward trend. Additional to what is outlined above it is worthy to remember that the "group" or "crowd" normally enter and exit a market at exactly the wrong time.

What we are witnessing today is the last of the private and institutional gold holders (not really central banks) becoming convinced that there is no point in hanging onto the "barbarous relic". Rather they should exchange it for some asset they can receive a greater return from; i.e. paper (stocks, bonds etc). Typically, "last holders" fatigue out just as a market bottoms. Example; In 1981 when paper had bottomed and gold was topping, "Alaska State Pension Fund" announced it would put large part of its assets into gold.

DON'T BE DECEIVED.
In the documentary "Millennium Money", Franklin Sanders compares the gold market to a pendulum "when it swings out the other way it will swing way-out the other way".

by Philip Judge
1999
(c) copyright 2003
www.anglofareast.com

BACK TO THE LIBRARY