The Economist Magazine and Hyperinflation

By: Mark O'Byrne | Mon, Jul 18, 2005
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Weekly Markets
Precious Metals - - Merrill Lynch on Chinese Demand
Citigroup & Gartman Bullish
Oil - Inventories, Hurricanes and 'Driving Season'
Commodities - FT on Commodity Indexes
Currencies - OPEC, Oil & the Euro
Bonds - Greenspan to signal higher rates
Stocks - Inflation Adjusted S&P Chart
Property - US Housing Charts

Weekly Commentary
The Economist Magazine and Hyperinflation?

Robert Rubin, Brendan Keenan, Cliff Taylor
David Smith, Gary Duncan, Bill Bonner, Stephen Roach, Charles MacKay, George Soros

Performance ( % Change)
  Current Level  5 Days  1 Year  5 Year 
Gold  420.50  -0.5%  4.2%  48.5% 
Silver  6.94  -0.3%  4.7%  40.2% 
S&P  1,227.92  1.3%  10.1%  -17.0% 
Nasdaq  2,156.78  2.1%  12.8%  -46.4% 
ISEQ  6,598.04  1.1%  21.9%  32.6% 
FTSE  5,230.80  0.0%  20.0%  -19.5% 
USD/EUR  0.8277  -0.9%  2.2%  -21.5% 
OIL (Nymex)  58.09  -2.6%  42.5%  81.5% 

Expected next SEC Chairman Chris Cox has invested in gold bullion & gold stocks.

Weekly Markets

Precious metals were flat to marginally down for the week.
Oil was down and commodities were mixed with some up and some down.
Stock markets were up for the week.
Bond markets sold off with a consequent rise in yields.

Precious Metals

Gold is lower by $2.20 or some 0.5% for the week; from $422.70 to $420.50

Silver is was lower by $0.02 for the week.

Platinum settled at $865 and was down some 1% for the week.

Bloomberg's Danielle Rossingh wrote of how Merril Lynch's Graham Birch believes that rising demand for gold in China could drastically increase the price of gold in coming years.

"The price of gold may rise to $725 an ounce as economic growth turns China into the world's biggest jewellery consumer, says Birch, who manages a Merrill Lynch fund that has grown fivefold since 2000.

Rising demand in China and a weakening dollar pushed the price of gold in London to a 16-year high of $456.89 an ounce in December last year. Gold last reached $850 an ounce in January 1980.

"The Chinese are getting richer, and have very high savings rates," says Birch, who helps manage about $8.5 billion in mining assets for Merrill Lynch. "As they earn more money, they will spend more on things like jewellery."

"At current growth rates, Chinese consumers would have to buy at least another 293 tons of gold a year to overtake demand in India, the biggest market today. That tonnage is worth about $4bn and equal to more than six weeks of global mine production.

"China's economy expanded 9.5% to about $1.65-trillion last year. Its 1.3 billion consumers are already the world's biggest users of commodities such as steel, cement, copper, tin and iron ore.

"Chinese jewellery consumption rose more than 11% to 224.1 tons last year, according to London-based research group GFMS. It may increase to as much as 600 tons within five years, Birch says.

"Indian consumers bought 517.5 tons of jewellery last year. "The question is: where is all that gold going to come from?"

"Mine production fell 4.4% last year, according to GFMS.

Citigroup concurs with Birch in Merrill Lynch and says the gold price this year will surpass the 16-year high reached in December.

The Gartman Letter advocated going long gold in Euro terms:"Gold in EUR terms, given the sizeable rally of the EUR, is weak as it trades EUR 350.75, testing the point from which Gold/EUR broke out to the upside several weeks ago. We shall strongly urge those who did not buy gold in EUR terms to do so this morning upon receipt of this commentary. Those already long are urged very strongly to sit tight."

Gold futures climbed back to end above $421 an ounce Friday, but prices for the precious metal marked a loss for the week after falling by nearly $7 over the previous two sessions.

'Relatively solid' economic data have provided some support for the dollar this week and correspondingly 'put severe pressure on gold,' said editor Brien Lundin in a recent Gold Newsletter.

The 'greenback was already riding high off' Wednesday's US trade deficit data for May, which came in at a lower than expected 55.3 bln usd, he said. Then the Labor Department's consumer price index report issued Thursday surprisingly showed zero price inflation for the month of June.

On Friday, the Labor Department reported that US producer prices were unchanged in June despite higher energy prices. Separately, the New York Federal Reserve reported continued manufacturing recovery in New York region in July.

The dollar thus managed to maintain upward momentum against most foreign-exchange rivals to close out the week.

But the prospects for gold and metals mining companies still 'look good,' said Lundin.

'If we haven't bottomed yet, we should only have two or three weeks left of short-term pain before beginning a rally that, typically, lasts through the fall,' he added.

'I believe the dollar remains overbought and the euro oversold,' said Lundin, pointing out that the euro should advance to the 1.25 usd level in the next few weeks, 'which would help give gold a leg up in dollar terms.'

The Los Angeles Times and Chief Financial Officer ( reported how Rep. Chris Cox, R-Calif., nominated to become Chairman of the Securities and Exchange Commission, Tuesday disclosed stock, mutual fund and other assets valued at between around $3 million and interestingly a large portion of his assets are in gold mining gold company, stocks and in gold bullion itself in the form of American Eagle gold bullion coins.

Merrill Lynch sees gold at $725 - Financial Express
A bejewelled China could see gold price rocket - Business Day
Expected New SEC Boss is Long Gold - Resource Investor
Future SEC Chairman Cox Invests in Gold Stocks - Chief Financial
SEC chairman nominee appears to be a gold bug - LA Times via Lincoln Journal Star
Gold prices tipped to double - The Standard
China's bling fling may push gold to $US725 - Sydney Morning Herald
Hedging against Potential Catastrophes - Waggoner, USA Today via News Journal
Gold forecast to hit $454 an ounce soon - S.A. Express
Gold gains in Asia on dollar dip, physical buying - Reuters
Gold May Rise as Terror Concern Boosts Appeal of Metal as Haven - Bloomberg
Silver: You Do the Math - Butler, Silver Seek, 13-07-05
The Shopping Season - Bonner, Fry & Casey, Daily Reckoning, 13-07-05
Gold & Silver Market Watch - Scotia Mocatta
The US National Debt To the Penny - Bureau of the Public Debt, US Treasury Department
Historical Debt Outstanding - 1950-2000 - Bureau of the Public Debt, US Treasury Department
The Future of the Dollar - The Passing of the Buck - The Economist
All that Glisters - Buttonwood, The Economist
The Trouble with Paper Money - The Economist
Is the US$'s Role as the World's Reserve Currency Drawing to a Close? - The Economist

In order to read the complete newsletter please click here or on Gold Investments Weekly Newsletter - The Economist Magazine & Hyperinflation.


Mark O'Byrne

Author: Mark O'Byrne

Mark O'Byrne

Brief Profile
Mark O'Byrne is Executive Director of Gold and Silver Investments Limited ( He is regularly quoted and writes in the international financial media and was awarded Ireland's prestigious Money Mate and Investor Magazine Financial Analyst of 2006. He is a financial analyst who believes that due to the current macroeconomic and geopolitical situation, saving and investing a small portion of one's wealth in precious metals is both prudent and wise. Gold and Silver Investments Limited believe that hard tangible assets and monetary assets such as gold and silver, the world's oldest forms of money, will once again become the safe haven assets of choice in the coming years. The increasing economic and geopolitical uncertainties at the dawn of the 21st Century mean that gold, silver and platinum will become increasingly important in the new century as a means of preserving financial wealth.

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