The Anti-Gold Camps Last 'Big Guns'

By: Alex Wallenwein | Thu, Oct 30, 2003
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As laid out in previous essays, the anti-gold forces are on their last float of ice, ice that is quickly melting away before the new (euro vs dollar) sun's golden rays.

Previously, we listed all the reasons why paper will continue to fall versus gold, and why it will stay that way for many, many years to come. This time, we will present the anti-gold forces' most powerful arguments why gold is not "that" safe an investment -- and why their arguments just don't wash anymore (if they ever really did):

Producer De-Hedging Will Stop:

So what? It was precisely because there was producer hedging in such quantities that the price of gold slid as far as it did in the 1990s. There is no reson in the world why the gold price will drop again once producer dehedging runs out (i.e., once producers have closed their last hedge book and no longer need to buy gold in the open market to deliver against their own hedges). Rather, when de-hedging stops, the market will return back to the situation it was in before "big paper" began pounding "big gold" into submission. That means gold will continue to rise toward its natural equilibirium as it would have had the Fed, the ESF, Rubin/Summers, Barrick, and the bullion banks, not commenced their concerted dollar-propping scheme to perpetuate the irrationally exuberant stock-bull of that decade.

The US Economy is Growing Fast Now

Yeah, and so is the US money supply, thanks to brother Al.

A growing economy is supposed to be "bad for gold" because gold is seen as "counter cyclical" by the gold bears. But the economy is growing at its current rate only because unprecedented amounts of liquidity are continuing to be pumped into it. Al must paper-over every shock to the US economy - or risk watching Toto pull the curtain away from the wizard's array of levers and gadgets, and the entire, articficially propped-up, economic mess we are in.

Besides, did you notice how gold kept right on "going up" despite this deja-vu bubble in US stocks? Gold is no longer singing the (reverse) tune of the business cycle. Instead, the business cycle and all other economic phenomena will soon "sing the song of gold."

The Dollar Will Stabilize:

Yes, it surely will. But at what levels???

The Washington Agreement Will Not Be Renewed (or renewed at higher gold-sales target levels).

Ah, yes, I understand. So that means, then, that the Europeans have the intention to sacrifice their entire combined gold stocks, and willingly agree to put them at the disposal of the US, just to prop up the dollar - at the obvious expense of their own newly-hatched currency? Sorry, not going to happen. The WA may be renewed at slightly higher levels, but only to assure a smooth transition away from the worldwide dollar-reserve system. They will not simply stop what they are doing - just to please "Amerika".

The Fear of Gold Confiscation (Uuuhhhuhhuhh, that makes me shudder! Say it again: "Gold Confiscation!!" Uuuhhuhhuhh. -- just like the hyenas saying "Mufassa!" to each other in "The Lion King")

The fear of gold confiscation surely is a big weight on many gold invstors' shoulders. But how much of a threat is it, really? Can you picture the current (or any other) administration confiscating it citizens' gold when the entire rest of the world, including communist China, is freeing all gold trade and all restrictions on ownership? Can you see real Americans asking their government: why, being socialists, are the other countries allowing free trade in gold while we, supposedly being capitalists, are not even allowed to own any?

Can you see the "Amerikan" media start a media-blitz claiming that all gold advocates are playing into the hands of terrorists and subversive anti-Americans at heart, (kind of like BlaBla Streisand saying that SUV drivers support terrorism) and that they (the government) are only doing this to protect the Homeland from these evil goldbugs' deeds? Well, I don't know about you, but if (true) Americans are buying that line and take it lying down, again, then this country already no longer exists, anyway.

The point is: in 1933, while the rest of the world was already off the gold standard or moving away from it, it was easy for Roosevelt to enforce his domsetic US gold-trading ban. Back then, virtually all Americans owned gold or held gold coins as currency. Today, virtually no American holds gold, and there is no gold currency in circulation worth mentioning. The amounts that the governing "Amerika" could get from such a move would be minuscule, so why bother? Even if successful, such a move would not in the least improve the dollar-forces' position internationally - and that is what really counts in today's currency environment.

COMEX is "Overbought." Prices will Collapse.

Who cares about the COMEX, anymore? In a few years, COMEX will be utterly irrelevant to the world of gold, and its current price-discovery function will be a distant memory.

COMEX is to ninety-nine percent a cash-settlement market. That means that only one percent of COMEX plays are ever actually delivered in specie. That market will only survive as long as it remains lined-up with this secular bull-trend in gold. Should COMEX raise the margin requirements again a few more times, people seeking to trade real gold will simply go elsewhere, like, say, Dubai, for example. (The Euro vs Dollar Currency War Monitor's upcoming seventh issue has some surprising facts about the future of gold trading in the world. The price-setting function of gold trading will soon be performed in the physical market - and it likely won't happen in the United States, the way things are going.)

Right now, the COMEX is going up nicely, but that's mainly because the Arabs and Chinese are jabbing at the dollar. Sooner or later, COMEX will lose its relevance. Those CFTC guys had better look for a job somewhere!

The Swiss Gold Sales:

Not a real factor. Only an excuse for pushing the gold price down temporarily. Remember last time the Swiss sales were blamed for one of those late-Friday pummelings of the gold price? Ha! These sales have been going on for years now, with minimal impact on the market. They were calulated to be as nondisruptive as possible (much in opposition to the BoE auctions of 1999 to 2001). The very fact that the anti-gold forces cited the Swiss sales, of all factors, as the "reason" for the decline proves they are on their very last leg.

Threats of Future Gold Sales by other Central Banks:

As for example the Dutch and German occasional rumblings. Whatever these rumblings are, these countries are bound both by the policies set by the ECB, and by the Washington Agreement. All in all, those are just threats, nothing more, and they are fast loosing their sting.

The Dollar Will Rebound:

Yeah, right.

With whose help? By whose power? The US ("Amerika") alone? Don't think so."Amerika" has lost its stranglehold on world monetary policy. There's a new kid on the bloc, and that (euro) kid just got some serious help from the quasi-communist bad-boy Russia, which is now selling its oil for euros, not dollars (the second country after Iraq). In that connection, please read (or re-read) our May 2003 essay entitled Goodbye Europe, Hello "Eurussia" - and Hello Gold.

The US Can Control Oil:

Really? Doesn't look too good, does it?

Maybe "Amerika" can use American troops and weaponry to control the middle-eastern oil producers for another while, but Russian oil has already "gone euro." The US military does pose a threat to Iran, which has already announced its intentions to go euro even before the Iraq attack. And as long as the King lives, Saudi Arabia won't do the same. But renegade Veneuela could try to make the next move. Or maybe Malaysia, or Indonesia? (All three are OPEC members).

Few people know that Canada of all countries is the second largest oil supplier to the US, right behind the Saudis, with almost identical amounts of exports to the US as Saudi Arabia has. Canada surely won't go euro anytime soon, unless it has no other choice - but it already has stocked up on euro forex reserves, and now holds almost as many of those as it holds US dollars (about 13 billion in euro, compared to about 15 billion in dollars, with only 0.8 billion held in various other currencies). Where do you think that trend is going?

Those are the anti-gold forces' biggest "guns", the only ones they got left to try and shoot down the price of gold again.

Not much of an artillery, really, is it?

These are the arguments against rising gold; the weapons of the anti-gold publicity war. They are unconvincing, at best. The only real ammunition the anti-gold camp has left, in the end, consists of the few gold-sales scraps the Europeans will throw them in their bid to keep the transition period "smooth" - and whatever unencumbered physical gold there is left in the US national gold stock (the gold that rightfully belongs to the American public, which "they" have no right to even touch). That will not last for very long.

The days of (fiat) dollar supremacy are over. The dollar can only survive if it aligns itself with that crazy yellow stuff.

Got gold?


Author: Alex Wallenwein

Alex Wallenwein
Editor, Publisher
The Euro vs Dollar Monitor

Just like driving your car, investing only makes sense if you can see where you are going. The Euro vs Dollar Monitor is your golden windshield wiper that removes the media's greasy film of financial misinformation from your investment outlook. Don't drive your investment vehicle without it!

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