Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Fri, Dec 26, 2003
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That was the year that was!

Gold ended on Friday 26th December at a high, touching $414, clearly confirming the market's desire to be long of gold rather than long of $'s. In a quiet pre-holiday market in Euros it was priced slightly higher than usual at Euros 330. Why is it performing so steadily in Euros and rising in $? Because it is continuously confirming the massive change in the position of gold in the world economy, not simply the reflecting the fall in the $. [See below]

In Japan where they have understood the consequences of the "weak" Yen policy, to protect exports at the expense of the currency, the Japanese were buying on the 25th December, to protect themselves against further falls, not of the Yen, but the $ pulling the Yen down with it.

The year looks as though it is ending what, in the context of the last few years, was a confirmation that gold had turned from a two decade long fall, to a, hopefully, decade long, rising market. May 2001 was the time that gold began to rise from a low of $260 thereafter rising persistently to present levels. However in Euros, as you can see below, its low was in January 2001.

In both currencies the large scale speculators, when they were almost entirely capricious and convinced that the Iraqi war was sufficient cause to push the gold price right up to almost $390, managed in their scrambling panic, to push it down to its medium term low in May 2003, of Euros 300 and $325. Thereafter, unnoticed by all, the entire market began to change its nature. Even the Large scale Speculators have changed from those fickle players to solid Investors, again highlighting the changes from the simple commodity market of the years beginning.

Gold - No longer just a $ priced commodity.

The majority of professional commentators look at gold both as a commodity and priced in $s. Indeed this week saw the head of one of the best gold companies in the world, one of the least 20 U.S. companies likely to go bust, GOLDCORP, sell the company's stock of gold and his own personal shares in the company. Put alongside this the that Gold companies have stopped de-hedging, and a consensus by Reuters of the top institutional analysts in the world have an average forecast for 2004 of $350, with the lowest down at $300 and the highest at $400. With gold at $414 will all these experts be right? Ordinarily we would touch a forelock, and sell all we had, wondering how it got to $413 in the first place.

But now its time to ask some weighty questions.

• Do the Analysts play it safe and keep their forecast near current levels hoping to stay below the radar?

• Or do they sincerely believe that there is going to be such a tumble in gold from the current level of $413 that it will average so little in 2004?

• Or have the de-hedgers been caught out of the money and are sitting, holding their breath, hoping that it will fall?

• Did they factor in the falling $ and look at gold just as a commodity?

• Has their research covered the impact of the global economic changes in their research, as they should have done?

• Can you afford to ignore the major market changes that have taken gold into different waters?

To us at Gold-Authentic Money we want to show more than blind acceptance of our august colleagues and ask them if they are about to issue changes to their forecasts and if not why not?

IN OUR CURRENT ISSUE OF "Gold-Authentic Money" WE GIVE OUR OWN GOLD PRICE FORECASTS. We will continue to focus on the changing market, the global picture, the fact that the $ is not an adequate measure of gold's value any more.

The circumstances of gold have now gone far beyond the commodity aspect and now encompass currency aspects, reserve asset aspects as well as investment aspects, which have the potential to radically change gold's entire future!

We ask one more question of our revered colleagues:

• Do you see the gold market in the context of the global economy, in global currencies and with gold as a feature of the monetary system and a source of non-currency asset value? - If they do not you can be sure they will be expensively wrong-footed in the market of 2004!

Proof of this? Commentators have and keep talking of gold as rising in $ terms, they have not see the Euro as a significant world currency and an alternative to the $, nor have they focused on gold being relatively constant in Euros. The physical market has adjusted to this, having been buyers of the metal even above $400 an ounce. In Mumbai, India the demand is strong at current levels and supply thin! The day to day realities of values other than those measured in $ are clear and present features of today's markets and must be factored in! Just compare the gold price in Euro chart above, to this chart below, of the gold price in $, to see what we are saying:

If the $ collapsed tomorrow, but gold still stood at Euros 330, then with the $ at half its current Euro value it would be twice today's price in $, without one more ounce of gold needing to be bought! The $ price would simply reflect the $'s fall. 2004 will see this reality being a daily aspect of the market. From now on make sure you can see Gold outside its $ facet to understand it well! How? - Subscribe to "Gold-Authentic Money"

• Gold, at the time of writing was trading at Euros 332.50 only two Euros up, and in $, $414 and rising.

• The Euro was trading at $1.2454 at the time of writing.

Perhaps you think this is a little dramatic a view? To further illustrate our point please look at the chart below of the Rand gold price, to illustrate how important a measure of value gold can be in different currencies. So what, you may say. Then ask yourself, why have the South African gold mines such as Durban Roodepoort Deep being performing so badly? Well, in Rands, the currency the gold mines receive for their gold, the gold price has been steadily dropping, to the point where they are discussing the retrenchment of thousands of workers, at a time when the $ price for gold is hitting new high levels. How can we understand this type of phenomena? - By understanding the place of the Rand in the monetary system, its position in the global economy and only then understand the underlying gold shares values, as they are measured by the Rand, then in $. To be sure if you don't understand the global economies, not only will you not get the S.A. gold shares right, but you will misunderstand the U.S., the Canadian and the Australian gold share markets too!

Gold in the Global Economy

In a nutshell, in 2003 Gold went GLOBAL! That's why we are now changing the name of this newsletter, to "Gold - The Weekly "Global" Perspective". The Global economy is still in the relatively early stages of control, but has developed sufficiently to refract the economic data used to guide us in local economic matters. It still has a long way to go to complete the process and many will say that it only reflects the fall in the $. But that is precisely the point, gold is relatively steady in Euros and rising in $. If the $ were regarded as the most important currency in which to price gold, it would have fallen in Euros and stayed steady in $! So why has it not done so? Because the $ is not regarded as the key currency in which to price, not only gold but Platinum Silver and other commodities.

Let's be clear on the importance of this to you the reader, including our U.S. readers, who usually see the rest of the world as of secondary importance, if you or your advisors are not tuned into this fundamental change in the market place you will make costly mistakes. Can you afford to do that, we think not?

We have laid the groundwork thoroughly in "Gold-Authentic Money", our newsletter and we will follow these developments closely, as well as keep you close to the Technical picture in our "Changing Tack - Gold & Precious Metal Shares".

The Global Economy disrupts the understanding of economic data in the U.S.A.

These changes have not affected precious metals alone. Even the basic interpretation of economic data in the local context of the U.S. will change. Already we have seen confusion, amazement and uncertainty at the path of the U.S. economic recovery, after the stimuli received from both the Administration and the Fed. Why?

• Why did the recovery take so long to pick up in 2003 in the States?

• Why did it start so quickly in the Far East and so vigorously.

• Why did the increase in employment in China burgeon in the early days of the recovery, as did manufacturing capacity utilisation and capital expenditure.

In both India and China, the joys of U,S. outsourcing came home to roost and brought the global economic revolution into top gear, with both those countries set to enjoy an 8% growth in GDP this year, if not next year as well.

The struggle inside the U.S. to get manufacturing utilisation up, to get unemployment down and the traditional functioning of the U,.S economy on the recovery trail, has been enormous and has still not established the sort of momentum necessary to sustain it.

• Why not? - Because of the growth and integration of the Global economy into the developed world's daily life.

• What next?

• And gold in the global economy in 2004?

• And the sight of both Gold and the Dow headed in the same direction? Again, you have to understand the Global economy to understand what's happening.

Central Bank Gold Agreement

Perhaps the confirmation of our view of gold will be best confirmed in the new Central Bank Gold Agreement to be finalised in 2004. If we are right this factor alone will provide such a positive view of gold that other factors, in response will carry the price to new highs for many years to come.

In 2003 there was a great deal of media debate over what the next Central Bank Gold Agreement is likely to be. Much of it was persistently targeted at the selling feature, usually assuming that more and more gold will be sold by the Central Banks in the future. In G-AM we have kept our eyes on what the signatories of the Washington actually agreed and the wording they used. By doing this one sees entirely different prospects for the next agreement. The statements made by the different signatories of the Washington Agreement over the last year are completely in line with the principles of the "Washington Agreement". We see no change in the original principles underlying the original agreement, so see a continuation of these in the next one. To repeat what one signatory's representative stated, there will be no material difference in the two agreements', except in the total, not annual, amounts to be sold.

We will continue to monitor the progress of the agreement in "Gold-Authentic Money" focussing on its impact, not only on the global monetary system, but on the gold market itself.

The London Gold Fix

Gold Fix 24th December a.m. $410.80  E331.023

Other Precious metals

Platinum

Ah the Funds who took the price to $844 started to retreat and took the price below $800, before it recovered to $823. The holiday period will see a quiet market until January 5th when the markets get back into full swing. Its recent past average price, allowing for the fall in the $ is $832, so it is still below its Euro level of late.

Silver

Again mirroring the Euro price against the $ now reaching $5.76 up at the top of its $ range. Allowing for the $ performance the Silver price unmoved in Euros should be around $5.69, so it is currently up in Euros.

To get our Silver / Gold [metals and shares] guidance subscribe to "Changing Tack - Gold & Precious Metal Shares"via our website.

Track Record of Gold-Authentic Money - Changing Tack - Gold & Precious Metal Shares

We Received this from one of our Subscribers and wanted to meet his request as follows:

"Thank you for the latest gold bullion buy signal at $393. So far, coupled with my own charting analysis, your precise call has helped me realize an 1000% profit trading high - leveraged futures contracts and the money is still rolling in. I just wonder if you can send me a detailed record of your trades, say, like, over the last 1 or 2 years. I think subscribers would gain a lot more confidence in you and your services if you can fully disclose your past performance."

So in reply here is our track record:

In 2003 we managed to make overall, over $160 net from the gold market this year, which started with gold at $350 and is finishing at $414. And we always keep our eyes on minimising losses and getting the best runs available from these markets. Tony Henfrey and well known Technical Analyst going back over 35 years in experience, keeps his fingers on the pulse in our other services which cover the broad spectrum of markets from Bonds to Currencies, etc. His "One-on-One" daily service is there to help each of you to make the moves in specific trades, while our original "Comparative Performance Model" puts you into the shares which will outperform the rest of the best of gold and precious shares, in our top-of-the-range, technical service called "Changing Tack - Gold and Precious Metal Shares"

Forecasts

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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.
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