Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Fri, Apr 22, 2005
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This weeks Features found in "Global Watch - The Gold Forecaster"
Review/Shares - HUI / NEM / FCX / NG / VGZ / GG / GSS / SIL / SSRI
The Fundamental versus the Technical Factors, or are they Partners?
- Increased oil supplies unlikely?
- I.M.F. Gold Sales didn't make the Agenda
- Protectionism takes one step forward with Bush's approval
- How to profit from South African Gold Shares!
- Prospects for the U.S. $ & $
- Technical picture. US Markets, Bonds, CRB Index.
- Summary: The present Gold Price Drivers.
- Technical Analysis of the Gold Price: Long/Short term. International Gold Markets. Silver / Platinum / Stock of the Week: US Gold Corp (USGL)

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How to profit from South African Gold Shares!
South African Gold Shares have suffered badly in the market place and even now Harmony is under attack from the National Union of Mineworkers who are presently trying to stop them from retrenching workers. To those who have seen DRD Gold and HMY savaged to the point where they are close to the value of the paper they are written on the question pressing for an answer is, "How can one not only lose no more money but make money in this market?"

Even now we may not have seen the bottom in S.A. gold share prices. There is a sound way, based on very profitable experience. We have gone to great lengths to help our Subscribers find this way and we would like you to find it too. We have covered this subject in the latest edition of "Global Watch - The Gold Forecaster". We have named four specific shares from which you could profit by reading this publication. To benefit from this, please see the subscription details below and go to the website to subscribe.

Prospects for the U.S. $
Last issue we said, "So, we watch the $ for the superficial picture, but beneath the surface the powerful current pulls the monetary world into a new, fragile and volatile state of instability". One week later has brought a scene that makes our point. The latest numbers on the inflation front, the housing front, the oil front and the deficit front, seem to be turning the tide in the affairs of men across the globe. The tide is completing its turning and an ebb tide seems to be taking over in the U.S. and the developed world economy.

We heard the term "consumer fatigue" used by one journalist. Perhaps it is the right one too. After all, the dramatic drop in housing starts in the last month seems to be consistent with the rise in interest rates. Of itself this need not have stemmed the number of housing starts, but in signalling that interest rates have turned and perhaps with it rising house prices, the demand is dwindling fast. Housing starts fell 17.6% in March to a seasonally adjusted 1.837 million annualised units down from 2.229 million level reported last month. This was the highest rate of housing starts in 21 years.

This is just what the Fed does not want! Growth has to be nurtured, because it has a delicate constitution. Even gentle moves can weaken it.

By now we should be seeing real wages rising and people overtaking their monthly commitments. Their expectations have to continue to be raised if they are to maintain consumer confidence. Leading indicators have to keep on improving, as continuation is simply not enough. Manufacturing capacity should be dropping as demand grows. The economy should by now have climbed to new levels of virility, to firmly establish a growth future.

Instead, for months now, there has been a great deal of running on the spot, going nowhere, but seeming sound. Now there is a positive waning and weakening that is becoming apparent to all and being reflected in the market. Unless inflation is pumped up alongside money supply to counter the drop in growth the picture of sudden drops in confidence reflected in dropping equity levels, flattening yield curves and drooping global growth [exclude China from this] will be with us.

Will dropping economic hormone levels happen quickly or take time? We believe the acceleration in the downturn will quicken.

When the head of the I.M.F. strongly said, "If policies do not adapt, do not change to react to these imbalances, we run the risk of an abrupt correction of the markets." Why? Because, "confidence for different reasons could evaporate or could be reduced."

Last week we said that interest rates would not be pushed higher in the present climate and this still stands. Federal Reserve Governor Susan Bies confirmed this possibility as she said the Fed could slow the pace of interest-rate increases. She said, "The Fed's plan to raise rates at a "measured pace" is going to change "at some point, because the economy is getting soft." We expect the Fed to pause in the raising of interest rates, which may help the consumer, but weaken the $!

In the new issue of Gold - Authentic Money we have produced an article on just what gold is now being sold and what could lie ahead for the sales of the signatories of the Central Bank Gold Agreement. Important new information has surfaced clarifying a picture that they have been at pains to camouflage. [We will send this FREE to Subscribers and new Subscribers only of "Global Watch - the Gold Forecaster". To subscribe to either publication - see below]

Protectionism takes one more step forward with Bush' approval.
The Bush Administration has given tacit support to a Bill, which threatens China with a whole range of tariffs across the board, unless it moves to a more flexible exchange rate, a Senator Charles Schumer informed the Press this week. Whilst it seems an extraordinary way to handle such an important stance towards China, in view of its impact on global trade, if it is indeed correct, this is a further step towards Protectionism.

It seems an inevitable progression of events that Protectionism should rise to high levels on global, not just the U.S. agenda. Most of the countries of the world are suffering from Chinese imports, which not only destroy competition, but maim and destroy local manufacturing industries. If this Bill is passed, you can be sure that many other countries will follow suit.

But to do this to force a revaluation of a currency seems an almost aggressive act. Has it come to that already?

The Chinese economy expanded faster than expected in the first quarter of 2005. Economic growth in the January-March quarter expanded 9.5% from a year earlier, the same amount as in the previous quarter and compared with a median forecast for 9.1% growth.

The realities of Debt relief
What is somewhat sad is that debt relief, per se, simply reduces the interest payable on debt, releasing funds for governments to use, as they see fit. In Africa this, as history and the present situation shows, is not necessarily consistent with cutting poverty! The bad record of so many governments there is that it has difficulty getting past them to the people.

Debt conversion, however, whereby new Investors into a poor country gain an effectively better exchange rate for his investment, bring jobs and can be directly responsible for cutting poverty where it is applied.

Fear of government interference in the future, often persuades new Investors to make sure that governments don't get overall control of a new investment into the country. The Panda gas fields in Mozambique are a classic example of this. The field was not developed for the Mozambicans but a pipeline deep under the ground runs for 700 kilometers straight into South Africa's Sasolburg for processing and use, with a royalty being paid to the Mozambique government for the gas. Almost no Mozambicans are employed on the project.

Debt conversion on the other hand, requires that the benefits to the country be detailed beforehand and employment of locals be part of the plan. In so doing these nations are not given fish but are taught how to fish. No debt relief per se, unless directed to the people on the ground will alleviate poverty and provide a long-term future.

I.M.F. Gold Sales didn't make the Agenda!
Many of you watching the gold market were waiting with baited breath for the issue of I.M.F. sales to raise its ugly head and be finalized. The subject barely rated a headline. But it is clear to all that it is 'off the table' of the I.M.F. agenda, with the U.S. doing what was expected.

The U.S. dealt the final blow to the proposal to sell or revalue part of the I.M.F. 's stock of gold to fund debt relief, saying categorically, "We are not persuaded by arguments for IMF debt relief, and we do not believe 'off-market' gold sales are necessary or warranted," Mr. Snow, the U.S. Treasury Secretary said. This would seem to be the end of the story!

The real issue behind the emotive distraction of I.M.F. gold sales was "Debt relief" for the poor nations of the world. The U.S made it clear again that Brown's plan for financing debt relief is off the I.M.F. table, leaving him to make his own plans in the so-called "coalition of the committed" in his International Financing Facility - a proposal aimed at bringing forward flows of aid so that the UN can meet its goals for cutting poverty, providing universal education and raising standards of health by 2015. John Snow, the US treasury minister, wants American help for poor countries to be channeled through the 'Millennium Challenge Account' set up by President Bush in his first term, and has made it clear that the I.F.F. is unacceptable to the administration.

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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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