Maple Leaf Steve
06-11-2005, 05:47 AM
Gold price could triple by 2015 as resources dwindle
Mining Weekly
Tuesday, June 7, 2005
The price of gold is set to rocket, says Andisa gold analyst Dr David Davis. His report, 'A trilogy of gold - an exploration in three parts', indicates that gold will reach $1 200 an ounce by the end of 2015.
His prediction is that in 2008 it will go to $700 an ounce, a year later it will climb to $750 an ounce and another $50 an ounce to reach $800 an ounce in 2010. In arriving at the answer, Davis looks at the current gold price, historical trends in mining operations and historical supply and demand patterns in the 55-page report.
He argues that supply is falling behind demand and fewer reserves are being mined as resources diminish. Not a new phenomenon, but previously this trend has been masked by Central bank sales and producer hedging - a dying practice. When this ceases, says Davis, economies of the age-old supply/demand equation will take over and flame the price of the metal.
Traditionally, gold has been a haven when currencies turned risky, having soared since 1971 when the gold standard was abolished. Currently, the dollar weakness and euro strength underpin the gold price. “The correlation between the dollar:euro exchange rate and the gold price is statistically significant. The correlation means that a one-cent change in the dollar:euro exchange rate drives the gold price by $3,6/oz,” says the report.
Dollar weakness will continue through 2005, possibly compounded by the Chinese yuan's move away from a dollar peg. Add to this inflation, and the dollar will remain weak yet will continue to underpin the gold price.
Dollar weakness is set to continue for the next ten years and supply/demand factors will, as Davis says, “trigger a quantum upward change in the gold price - enough to sustain a higher gold price, but now at a new gold price $ equilibrium”.
Davis says that mine production over the next ten years is likely to decline significantly. This is, in part, due to dwindling reserves, and new mines coming on stream will not offset the shortfall. Global production, says Davis, will drop after 2006 to between 2 100 t and 1 790 t by 2010.
Hopes of more gold underground dashed
Andisa calculates 29 new mines are due to come on stream. “If all 29 new mines are commissioned, global production will decline after a possible peak in 2006.”
In addition, exploration has moved away from the safe Archean terrain and now the possibility of finding sizable ore-bodies is shrinking – yet again driving price up. Davis also points out that the reserve grade is falling off, and not being replaced in time.
Costs that have decreased on the back of the dollar are likely to swing and turn upwards. This will trigger higher prices, he says.
What is the future of the gold price?
Davis reiterates that the dollar will continue to underpin the gold price, but the supply/demand factor will enter the picture and push prices up.
In addition, “between 2007 and 2010, supply and demand dynamics will undergo irreversible change, caused by a decline in global mine and Central Bank supply and increased demand from China and investment”. Costs will rise, forcing prices up again.
The above information has been redacted the article as it originally appeared in Mining Weekly on June 7, 2005. Bolding added.
Physical Gold Demand is Outstripping Supply
By Rhona O'Connell
MineWeb
Monday, June 6, 2005
LONDON -- Demand for physical gold has been rocketing this year - up by more than a quarter in the first three months. [T]he World Gold Council.reports that gold offtake was up by 26% in tonnage terms in the first quarter of this year when compared with demand in the first quarter of 2004. In dollar terms the increase was 32%.
This was driven particularly from the jewellery sector, bar and coin purchase and from investment in gold-backed exchange traded funds, further stimulated by an undercurrent of political and economic unease, which favoured gold investment. With consumers accustomed to the higher price range, dips towards the lower end of the $420-$440 range were seen as buying opportunities and anecdotal reports suggest that buying rose strongly when the price fell towards the lower end of this range.
Investment demand for coins and bars was vibrant in the four major markets of India, Japan, Vietnam and Turkey, aided by unease over the economic and political backdrop. In the US, jewellery demand rose by 3% and net retail investment was up by 5%.
Gold-backed ETF's and similar products contributed 89t to overall demand.. ETFs [are] attracting many investors who are new to gold along with those taking a long-term view. The investment environment, including the geo-political and economic background along with concerns over the medium-term outlook for the US dollar were all conducive to longer-term gold investment.
While demand was up by 26%, supply increased by 23% against the first quarter of 2004.. The outlook for the second quarter is essentially positive, with factors supporting increasing gold demand remaining largely in place.
The above information has been redacted the article as it originally appeared on Mineweb on June 6, 2005.
Summit-Newmont sees $525 gold by January
By Zachary Howard
Reuters
Thursday, June 9, 2005
NEW YORK - The price of gold should rise to $525 an ounce by the start of 2006, a top executive of gold giant Newmont Mining Corp. said on Thursday.
Pierre Lassonde, president of the world's largest gold mining company, cited an expected decline in the U.S. dollar by another 15 percent against a basket of currencies, world economic growth strong enough to keep physical demand buoyant and a continuing gradual decline in gold output.
Speaking at the Reuters Mining Summit, Lassonde said consumer and investor demand for gold is tenacious at current prices and world production is in a decline, which should hoist gold out of a current "$400 to $475 range."
"When you add it up, we think you can see gold at $525 by Jan '06," he said to reporters at Reuters offices in New York.
"The physical market is very strong at these prices. There is enormous demand," Lassonde said.
Investors are buying gold as well, in favor over the euro and the dollar, he added, with bullion making its way into vaults in Switzerland and heading into the Middle East, India, China and Turkey.
"Those are the big markets right now," said Lassonde.
Newmont expects gold production to fall by 0.5 to 1 percent this year and next, while the company's own output growth, as the leading worldwide producer, should be 4 to 5 percent over next three years, the executive said.
Spot gold changed hands at about $424 an ounce at midday Thursday, down 4 percent since the start of the year.
A dip below $425 in the last month was primarily due to slowing demand for jewelry from India after the busy March-to-May wedding season and decreased buying by Italian jewelers before summer holidays begin in July, he said.
Still, the market has recovered from repeated attempts to press it below $415 because of solid demand, said Lassonde.
Bullion hit a 16-year high of $456.75 last December on the back of a falling dollar, which tends to make the U.S. currency-priced metal cheaper for non-U.S. investors.
"We believe that the dollar trade-weighted index has another leg down to go, another 15 percent, mostly against the Asian currencies. We think we're going to see a great deal of that happening in the next nine months.
"If we see a revaluation of the (Chinese yuan), I would think gold sales would increase even more substantially" throughout Asia, Lassonde said.
Gold's rise in euro terms may signal broader rally
By John Parry and Zachary Howard
Reuters
Tuesday, June 7, 2005
NEW YORK, June 7 (Reuters) - Gold prices may be about to benefit from both volatility in and a lack of confidence in several of the world's major currencies, with gold's price in euros a key indicator, analysts said.
Gold, as a classic hedge against global investors' worries about inflation or geopolitical instability, was a beneficiary of the dollar's three-year decline through the end of 2004. Gold is priced on international bullion markets in dollars, and the precious metal has a tight inverse price correlation with the U.S. currency. The dollar has rallied so far in 2005, lifted mainly by rising U.S. interest rates, and gold prices in dollar terms have fallen by 3.2 percent.
This month, however, gold prices have begun to rebound, even although the dollar has remained strong, and with the euro down more than 9 percent this year, some analysts are tracking the price of gold in euros as an indicator of demand for hard assets. On Tuesday, spot gold was trading at around $425 per ounce and gold in euros was at 346.40.
"If gold breaks above 350 euros per ounce, that will signify the market is shunning all paper currencies", said Jes Black, hedge fund manager, with Black Flag Capital Partners LLC, Hoboken, New Jersey.
If gold were to rise above that level "what you would see is a mad rush into gold. ... It could very well spark a very large rally in gold," Black said.
The euro has come under under pressure this month after both France and the Netherlands voted against the proposed EU constitution in referendums.
Between 350 and 355 euros per ounce, an area touched several times in the last three years, "is a very, very big resistance level," which if broken "would institute a good trading opportunity," said Jordan Kotick, global head of technical analysis with Barclays Capital in New York.
Paul McLeod, vice president of precious metals at Commerzbank in New York, said he felt an initial break above 350 euros would not necessarily prove decisive, because resistance there was so strong. In recent years "gold has come a long way in U.S. dollar terms, but it has been in a relatively narrow range in euro terms between 300 and 350," he said.
"I don't believe it's a breakout until we have a couple days solidly above 350, in which case my view would change and maybe we do have some good upside technical developments taking place," McLeod added.
GOLD IN EUROS THE KEY
Any sustained rise of gold above 350 euros might be the precursor of gold climbing significantly against the dollar also, especially if $450 is breached, currency analysts say.
Meanwhile, the dollar remains strong, supported by higher interest rates in the U.S. than in Europe or Japan. But Asian currencies could attract some investment if China revalues the yuan , removing its peg to the dollar, and a weaker dollar would again provide support for gold prices.
"Gold is starting to firm up against all the currencies. Technically, that is looking very good," said one metals broker at a futures commission merchant. "Keep an eye on gold at above 350 in euro terms," he said.
Believing (and Believing and Believing) in Bullion
By Stephen Matcalf
The New York Times
Sunday, June 5, 2005
On a recent early spring morning, I made my way down to the appropriately poker-faced and austere building that houses the Federal Reserve Bank of New York. In its sub-basement, 80 feet below street level, there is a vault that rests on the granite bedrock of Manhattan. "No man-made floor could hold the weight of all this," Peter Bakstansky, a Fed spokesman, assured me. The vault holds 7,000 tons of gold. This represents the world's largest stash of the precious metal, and it is worth about $100 billion.
Gold is a majestic condenser of wealth. A standard bar is seven inches long, three and five-eighths inches wide, and about one and three-quarters inches thick. It weighs 27.4 pounds, and at the current market price -- roughly $420 a troy ounce, the unit in which gold is measured -- is worth about $170,000. As miraculous as gold is in itself -- it is soft, dense, ductile, sectile, highly conductive, all but indestructible and, of course, very beautiful -- when you look at any quantity of it, you immediately exchange it in your head for something else. One bar, college education; 10 bars, Brooklyn town house. The cage in front of me appeared fairly small. Filled to the ceiling with gold bars as it was, it might well hold the financial health of a nation in the balance.
Most of the bullion at the New York Fed is kept -- in 122 separate lockers -- in custody for foreign countries. (Most American gold is in Fort Knox.) Egyptians were casting bars of gold thousands of years ago; but the thrust of human history has been away from hard money and toward virtual money, like paper bills, or even little electronic pulses shot off by the trillion across the ether. When I remarked that all this brute physical wealth represented an anachronism, Bakstansky seized upon the word brightly.
"Yes, exactly. Gold is an anachronism."
"And yet," I said, "all these nations, they hold on to this anachronism, just in case. . . . "
To a small but extremely avid subculture in the American financial community, gold doesn't mean bling, or King Midas, or them thar hills. Gold is money; and not just money, but the one true money. The gold subculture divides along several lines -- some of its members are gold speculators, some gold hoarders, some gold philosophers… -- but it unites behind a single idea: Paper money issued by governments, when not redeemable for actual gold, is fraudulent. Most of us accept the existence of dollar bills unconsciously. To the gold faithful, however, a dollar bill is "ink money," or better yet, "fiat currency,". "Fiat currency -- it's a floating abstraction," Doug Casey, a star speaker on the gold circuit, bellowed at me over the phone. "What's its worth? I don't know what it's worth! It's a figment of some government bureaucrat's imagination!"
The "gold bugs," as they often are referred to with more than a hint of disdain, find gold appealing because they believe it represents the one enduring form of nonstate money. "Money is far too important to be left in the hands of bankers, Congress or the Federal Reserve System," Gary North, a legendary gold bug who has edited financial newsletters for decades, told me via e-mail.
I had sought out Casey and North, two leading voices among gold enthusiasts, because after 20 years during which paper assets -- stocks, bonds, and the world's leading "fiat currency," the dollar -- soared, gold was making a comeback. If you bought $10,000 worth of gold in 1980, by 2001 you would have lost $6,800. But then the long bull market in stocks ended, and the dollar, responding to the growing debt burden of the average American, not to mention the federal debt and our trade deficit, began a steep decline. And so, starting in 2001, gold, which like many commodities moves in the opposite direction of the dollar, began to recover some of its lost glamour as a store of value. The price of gold broke through the $300 barrier in February 2002, then the $400 barrier at the end of 2003. Could this be the dawn of the apocalypse that the gold bugs, whose prevailing attitude might best be described as a wishful pessimism, have been predicting? Could the dollar collapse, leaving only gold?
For the past 70 years, the United States has been conducting an experiment regarding the dollar. The experiment asks: Can the United States manage its currency responsibly, without having that currency backed by gold? The U.S. effectively went off the gold standard twice in the 20th century, and both times responsible men in positions of power foresaw cataclysm.
In fact, the recent weakness of the dollar has become an idée fixe within the gold community, as it opens up one possible route back to an economic system ballasted by gold. Representative Ron Paul, a Republican from Texas who is gold's lonely advocate in Congress, put it to me this way: "We will go back to the gold standard, even if it takes the near-destruction of the dollar to get there."
James Sinclair is a 64-year-old American businessman in a tan blazer and navy blue slacks. Among the most famous gold speculators, Sinclair proclaimed in the 70's that gold, then at $150 a troy ounce, would hit $900. (It eventually peaked at $887.50; he sold his position the following day, for a profit of more than $15 million.) Then, with some analysts predicting that gold could go as high as $2,000, he declared the gold bull market dead. (Within months, he was proved right.) In 2001, with gold near its bear-market lows, Sinclair told Forbes magazine that it could hit $430. On the day I met him, gold was trading at $434.
Sinclair regards gold with dispassion. "Gold is not to be loved or hated, accepted or refused," he said. "Gold is not barbaric or angelic. It fixes nothing in itself. But it is a mirror." Sinclair sees the health of the dollar reflected in the price of gold, and the health of the dollar is now in foreign hands. "We're not talking about what I want, but about what is," he told me, as he picked through a tuna salad. "If we go over $529, that is not good news," he said, referring to the price of gold. Sinclair says that when the dollar acts successfully as the world's currency, gold naturally returns to its status as a mere commodity. But a mismanaged dollar, he said, could cause gold to remonetize. Our world would look very different then. "The first sign is the foreign banks will diversify out of dollars. Then they will cease buying dollars. And then they will sell them." What could happen then? "Stagflation…. Expansion of U.S. federal deficit. Expenses rise and incomes drop."
Are we talking apocalypse? "The most likely crisis is the collapse in the common stock of the operating entity. In this case, the operating entity is the United States, and the common stock is its currency…Everything has its season. That includes gold."
"This is the blow-off phase for the Great Dollar Era. We're in an unsustainable trend right now," [Addison] Wiggin [editorial director of The Daily Reckoning] told me, ticking off the miscalculations that have brought us to the brink of an economic apocalypse. To begin with, the U.S. has become the world's biggest debtor, with three outstanding obligations at alarming highs: consumer debt, or our mortgages and credit cards; the federal deficit; and our current account deficit with foreign countries. Federal Reserve Chairman Alan Greenspan, Wiggin continued, has simply shifted one bubble -- the 90's bubble in stocks and bonds -- into another, in real estate and "overconsumption," or the American propensity to pay for an ever-more-lavish lifestyle on credit.
But the real nightmare involves the U.S. dollar. If Asian central banks weary of buying Treasury bonds -- an asset denominated in the weakening dollar -- then look out below. "What is that Dylan Thomas quote?" Wiggin wondered…. "The dollar will not go gently into that great night."
Wiggin offered up his analysis with a confident and steady aplomb. And for good reason. [A]t this moment, the gold bugs' grim prognosis for the dollar happens to align with a more mainstream view. A low-level panic about the debt crisis, and its possible effect on the American economy, is gathering strength. "Our little post-bubble workout is not over, not by any stretch of the imagination," Stephen Roach, the chief economist at Morgan Stanley and himself a noted pessimist, told me recently by phone. Roach says he firmly believes that an adjustment is necessary and inevitable, and that when it comes, it will be very, very painful. From appearances, Warren Buffett, the savviest investor who ever lived, agrees. His company, Berkshire Hathaway, has placed a $21 billion bet against the U.S. dollar.
Meanwhile, the general tone is darkening. In February, Paul Volcker, the former Federal Reserve chairman, publicly stated in a speech that "there are disturbing trends" undergirding the U.S. economy, including "huge imbalances, disequilibria, risks." These demand "a strong sense of monetary and fiscal discipline," he said, gently chiding both the U.S. government and its citizens to live within their means. Volcker, a man known for his prudence and a cautious tone, let his words ring ominously. "Altogether, the circumstances seem to me as dangerous and intractable as any I can remember," Volcker continued, referring to the very same warning signs as Addison Wiggin, "and I can remember quite a lot."
Recently, Comptroller General David Walker, surveying America's debt crisis, uttered a one-word synopsis for the long-term future: "Argentina." Gold, like everything else, is a commodity whose price is established by supply and demand. But gold is unlike everything else in that an ancient fantasy of solidity attaches to it.
The above information has been redacted from the original article as it originally appeared in The New York Times on June 5, 2005.
Global Economic Collapse
By Al Martin
CNBC
Friday, June 3, 2005
AL MARTIN has written an article about an interview on CNBC with the renowned funds manager Julian Robertson.
Julian Robertson formerly ran Tiger Management, the world's largest hedge fund.
Martin describes Julian Robertson as "One of the greatest of the old-timers. 53 years on the Street. He manages the Robertson group of funds. They used to call him, still do call him `Never Been Wrong' Robertson. He has predicted every economic cycle, every debacle, every bull market, and every bear market."
Martin says "Of course, he's a very old man now. But his reputation on the Street is like nothing you could imagine. When the segment of his interview was through, his comments alone took the Dow Jones down 50 points. Just on his comments alone. That's how powerful this man's reputation is."
Robertson said that he's worried about the speculative bubble in housing and the fact that more than 1/4 of all consumer spending is now sustained by that bubble, plus the fact that 20 million citizens could lose their homes in a collapse of the speculative bubble in housing, and that the Fed and, indeed, central banks worldwide would act in concert out of desperation to reinflate the global economy in the process, creating an inflationary spiral unheralded in the economic history of the planet.
"Where does it end?" Robertson was asked and he said, "Utter global collapse." Not simply economic collapse; complete disintegration of all infrastructure and of all public structures of governments. Utter, utter collapse. That the end is collapse of simply epic proportion.
In 10 years time, he said, whoever is still alive on the planet will be effectively starting again."
Bill Murphy of [Le Metropole Café] says "As for Robertson’s comments as they relate to the gold price, we will most likely see the gold price somewhere between $3,000 and $5,000 US an ounce. Wait until the facts surface about how the central banks squandered 2/3 of all their bank reserves to foster a price manipulation scheme. There will be a frenzy to own the stuff like never seen before."
I would add to Julian Robertson comments, the lucky ones will be the ones who buy gold and silver coins now, at less than $500 an ounce before the price of gold sky rockets to $3000 then $5000 and the price of silver goes over $100 in the years ahead as Julian Robertson's predictions, made in his interview on CNBC, unfold.
The above information has been redacted from the original article as it originally written by Al Martin on June 3, 2005.
Gold: The only currency that can't be printed
By Bill Fleckenstein
April 11, 2005
MSN Money
As far back as April 2003, in a speech I gave at the Las Vegas Precious-Metals Conference, I stated that gold would benefit from an inevitable economic crisis of confidence (which could be postponed but not avoided). Now, nearly two years later, it is my belief that the catalysts for this crisis are here. This week I will focus on one of them, the dollar.
The buck stops at the editorial page
Growing concerns about the dollar, in fact, prompted editorials in both The New York Times and the Financial Times (known as the FT) a week ago. The Times' April 2 editorial, "Before the Fall," takes exception to the sanguine viewpoint "that foreign central banks won't risk the losses in their dollar reserves that would occur if they started shunning dollar-based investments." In brief, the editorial warns, "the United States is betting that it's too big -- in other countries' eyes -- to fail."
The limits of foreign largesse
The Times also warns that if foreign central bankers decide to stop buying our dollars, we may need to "borrow in the face of an ever-weakening dollar -- a recipe for higher interest rates and higher prices." Further, it notes: "If the economy is in a housing bubble, as many analysts believe, higher mortgage rates would pop it, with dire results for homeowners' balance sheets and the overall health of the economy."
I suspect that "dollar bag holders," i.e., the foreign central banks, won't feel comfortable reading this, and it will strengthen their resolve to lighten their dollar positions. From a perversity-of-markets standpoint, though, the fact that the editorial board of The New York Times felt so compelled to write this editorial may mean that the dollar bounce will continue.
Meanwhile, though I have been bearish on the dollar for some time -- and think it's headed lower over time -- I would not have spoken as forcefully about the immediate future as the editorial did here: "The recent rally of the United States dollar notwithstanding, the greenback has nowhere to go but down . . . The dollar's current uptick is just a breather in its overall downward trajectory . . . The dollar is heading down, no matter what." I say that because, as anyone with any experience in the financial arena knows, in the short run, markets can do anything.
However, I think it's worth noting that The New York Times editorial page dislikes the present administration so much that it has a bit of an agenda. Thus, its argument may be seen as more political than heartfelt economic concern.
The above information has been redacted from the article as it originally appeared on MSN Money on April 11, 2005.
Richard Russel's Remarks
Dow Theory Letters
Thursday, June 2, 2005
It would be very helpful if you could address the situation of the conservative investor (someone whose greatest concern is to preserve capital). What should the conservative investor be doing in terms of whether or not to buy bonds and which currency should the investments be made in?
Best wishes,
R Stevens
Talk about a tough question, Ms. Stevens gets a gold star for this one. Let's see -- how to invest conservatively, hmmm. First, I don't know of any one or two sectors that will do the trick. If I did, I'd be fully invested in them myself, which I'm not.
Therefore, you're forced to diversify. Yeah, I know, diversification is for people who don't know where to put their money. Even Warren Buffett tends to think that way. View investing, says Buffett, as a situation where you make maybe one decision every year. No in-and-out hedge-fund-like trading, just one move every year.
OK, but I think it's a bit late for that one move. Here's they way I'd go. I'd have about half my money in cash, US dollars, and by that I mean in a money market fund, short government paper (T-bills). Then I'd have about 15 percent in gold coins or some form of gold. With the remaining 35 percent I'd probably be in a mixture of top-grade utilities, closed-end funds, preferreds, long T-bonds.
The real problem is that you've asked that question here in June 2005 when interest rates are ridiculously low and everybody is scrounging around for "safe, high yields." There isn't much in the way of safe, high yield today. It's all been locked up and put away over the last few years.
I've been saying ever since late-1999 that INCOME was going to be the operative words in coming years. For that reason, I was recommending utility stocks with juicy yields of 5-6%, preferreds, AAA munis, anything that provided subscribers with attractive income. How about closed-end funds like RCS, ACG, LBF, DUC, PFD (check BigCharts).
Yesterday the 10 year T-note surged, while yielding a lowly 3.9%. Sure that's better than what you can get in Europe, but so what, it's still not the kind of yield that leaves one drooling for more.
Of course you can just hold your money, sit tight, and hope for better yields some time in the future. The odds are that something or some sector will turn up. But as I see it, the problem is that we're facing a global slowdown, and if that's true central banks will do everything in their power to keep rates down. And so will bond buyers (which is what they've actually been doing).
Yesterday a Fed governor talked about the Fed's meeting at the end of June being "the eighth round" in the "measured" increase game, and many investors took this to be (which it wasn't) an announcement that the Fed is about finished with raising short rates. Well, maybe and maybe not. Much may depend on the real estate bubble and whether it continues to swell.
The question might legitimately be asked, "Russell, why only 15% of assets in gold?" And my answer runs like this -- Every fiat paper currency in history has ended up in the ash can. The dollar and the euro and the yen will end up the same way unless they are ultimately backed by something real like gold. Therefore, why not be invested say 50% or even more in gold?
The answer is timing. And nobody on God's green earth knows the correct timing. Look, the way it's going the US could have a trillion dollar current account deficit in a few years. We're losing our manufacturing base, we're depending on foreigners sending in $2 billion a day to sustain our spending habits, and we're facing relentless competition from foreigners in almost every sector of our economy.
On that basis we could have a dollar crisis in a six months, a year, three years, five years. But with our current account deficit running better than 6% of our GDP -- there's a crisis is out there waiting to happen.
Of course, if US consumers suddenly decide to cut back on their spending and actually switch to saving, the situation would change. The catch there is that if US consumers cut back importantly, the US would sink into recession. And with the trillions of dollars of debt now outstanding in the US, a recession would be a disaster. A recession would quickly turn into a deflationary recession, and then you're not talking about just a disaster, you're talking about a major disaster.
So where do you go for more income? Best answer -- ask your boss for a raise.
OK, let's talk markets. The problems of the European constitution, or what's left of it, are now out in the open. The French and the Dutch used their vote on the constitution as a sort of "punching bag." They're angry about immigration, about socialism, about capitalism, about European leadership, about Brussel's power -- you name it, whatever it is, they've had enough of it. The anger is out in the open, and the "No" vote has absorbed it.
So has the euro hit its low? There's a good chance that it has. If so, then the euro is probably ready to correct upwards against the dollar. The rise in gold and gold shares may be telling us that. I'm writing this on Thursday morning, so I don't know where gold will close today, but this morning as I write gold is up 5.20. We'll see if "they" can knock it down by the close.
What does the euro look like on the charts? In a word -- oversold. Gold has tended to move with the euro, and gold is higher today. Russell guess -- the euro is ready to rally.
[O]il is in position to test its recent high at 58. The P&F "count" or target for oil is now 65. If oil does hit 65, that will put major pressure on the US economy, and certainly on the owners of a few million SUVs. Oil, some call it "black gold," let's see where she goes. Just to make it more difficult, oil was down about a dollar at the close today.
The above information has been redacted from Richard Russell's Remarks as they appeared on Dow Theory Letters on June 2, 2005. Bolding added.
Mining Weekly
Tuesday, June 7, 2005
The price of gold is set to rocket, says Andisa gold analyst Dr David Davis. His report, 'A trilogy of gold - an exploration in three parts', indicates that gold will reach $1 200 an ounce by the end of 2015.
His prediction is that in 2008 it will go to $700 an ounce, a year later it will climb to $750 an ounce and another $50 an ounce to reach $800 an ounce in 2010. In arriving at the answer, Davis looks at the current gold price, historical trends in mining operations and historical supply and demand patterns in the 55-page report.
He argues that supply is falling behind demand and fewer reserves are being mined as resources diminish. Not a new phenomenon, but previously this trend has been masked by Central bank sales and producer hedging - a dying practice. When this ceases, says Davis, economies of the age-old supply/demand equation will take over and flame the price of the metal.
Traditionally, gold has been a haven when currencies turned risky, having soared since 1971 when the gold standard was abolished. Currently, the dollar weakness and euro strength underpin the gold price. “The correlation between the dollar:euro exchange rate and the gold price is statistically significant. The correlation means that a one-cent change in the dollar:euro exchange rate drives the gold price by $3,6/oz,” says the report.
Dollar weakness will continue through 2005, possibly compounded by the Chinese yuan's move away from a dollar peg. Add to this inflation, and the dollar will remain weak yet will continue to underpin the gold price.
Dollar weakness is set to continue for the next ten years and supply/demand factors will, as Davis says, “trigger a quantum upward change in the gold price - enough to sustain a higher gold price, but now at a new gold price $ equilibrium”.
Davis says that mine production over the next ten years is likely to decline significantly. This is, in part, due to dwindling reserves, and new mines coming on stream will not offset the shortfall. Global production, says Davis, will drop after 2006 to between 2 100 t and 1 790 t by 2010.
Hopes of more gold underground dashed
Andisa calculates 29 new mines are due to come on stream. “If all 29 new mines are commissioned, global production will decline after a possible peak in 2006.”
In addition, exploration has moved away from the safe Archean terrain and now the possibility of finding sizable ore-bodies is shrinking – yet again driving price up. Davis also points out that the reserve grade is falling off, and not being replaced in time.
Costs that have decreased on the back of the dollar are likely to swing and turn upwards. This will trigger higher prices, he says.
What is the future of the gold price?
Davis reiterates that the dollar will continue to underpin the gold price, but the supply/demand factor will enter the picture and push prices up.
In addition, “between 2007 and 2010, supply and demand dynamics will undergo irreversible change, caused by a decline in global mine and Central Bank supply and increased demand from China and investment”. Costs will rise, forcing prices up again.
The above information has been redacted the article as it originally appeared in Mining Weekly on June 7, 2005. Bolding added.
Physical Gold Demand is Outstripping Supply
By Rhona O'Connell
MineWeb
Monday, June 6, 2005
LONDON -- Demand for physical gold has been rocketing this year - up by more than a quarter in the first three months. [T]he World Gold Council.reports that gold offtake was up by 26% in tonnage terms in the first quarter of this year when compared with demand in the first quarter of 2004. In dollar terms the increase was 32%.
This was driven particularly from the jewellery sector, bar and coin purchase and from investment in gold-backed exchange traded funds, further stimulated by an undercurrent of political and economic unease, which favoured gold investment. With consumers accustomed to the higher price range, dips towards the lower end of the $420-$440 range were seen as buying opportunities and anecdotal reports suggest that buying rose strongly when the price fell towards the lower end of this range.
Investment demand for coins and bars was vibrant in the four major markets of India, Japan, Vietnam and Turkey, aided by unease over the economic and political backdrop. In the US, jewellery demand rose by 3% and net retail investment was up by 5%.
Gold-backed ETF's and similar products contributed 89t to overall demand.. ETFs [are] attracting many investors who are new to gold along with those taking a long-term view. The investment environment, including the geo-political and economic background along with concerns over the medium-term outlook for the US dollar were all conducive to longer-term gold investment.
While demand was up by 26%, supply increased by 23% against the first quarter of 2004.. The outlook for the second quarter is essentially positive, with factors supporting increasing gold demand remaining largely in place.
The above information has been redacted the article as it originally appeared on Mineweb on June 6, 2005.
Summit-Newmont sees $525 gold by January
By Zachary Howard
Reuters
Thursday, June 9, 2005
NEW YORK - The price of gold should rise to $525 an ounce by the start of 2006, a top executive of gold giant Newmont Mining Corp. said on Thursday.
Pierre Lassonde, president of the world's largest gold mining company, cited an expected decline in the U.S. dollar by another 15 percent against a basket of currencies, world economic growth strong enough to keep physical demand buoyant and a continuing gradual decline in gold output.
Speaking at the Reuters Mining Summit, Lassonde said consumer and investor demand for gold is tenacious at current prices and world production is in a decline, which should hoist gold out of a current "$400 to $475 range."
"When you add it up, we think you can see gold at $525 by Jan '06," he said to reporters at Reuters offices in New York.
"The physical market is very strong at these prices. There is enormous demand," Lassonde said.
Investors are buying gold as well, in favor over the euro and the dollar, he added, with bullion making its way into vaults in Switzerland and heading into the Middle East, India, China and Turkey.
"Those are the big markets right now," said Lassonde.
Newmont expects gold production to fall by 0.5 to 1 percent this year and next, while the company's own output growth, as the leading worldwide producer, should be 4 to 5 percent over next three years, the executive said.
Spot gold changed hands at about $424 an ounce at midday Thursday, down 4 percent since the start of the year.
A dip below $425 in the last month was primarily due to slowing demand for jewelry from India after the busy March-to-May wedding season and decreased buying by Italian jewelers before summer holidays begin in July, he said.
Still, the market has recovered from repeated attempts to press it below $415 because of solid demand, said Lassonde.
Bullion hit a 16-year high of $456.75 last December on the back of a falling dollar, which tends to make the U.S. currency-priced metal cheaper for non-U.S. investors.
"We believe that the dollar trade-weighted index has another leg down to go, another 15 percent, mostly against the Asian currencies. We think we're going to see a great deal of that happening in the next nine months.
"If we see a revaluation of the (Chinese yuan), I would think gold sales would increase even more substantially" throughout Asia, Lassonde said.
Gold's rise in euro terms may signal broader rally
By John Parry and Zachary Howard
Reuters
Tuesday, June 7, 2005
NEW YORK, June 7 (Reuters) - Gold prices may be about to benefit from both volatility in and a lack of confidence in several of the world's major currencies, with gold's price in euros a key indicator, analysts said.
Gold, as a classic hedge against global investors' worries about inflation or geopolitical instability, was a beneficiary of the dollar's three-year decline through the end of 2004. Gold is priced on international bullion markets in dollars, and the precious metal has a tight inverse price correlation with the U.S. currency. The dollar has rallied so far in 2005, lifted mainly by rising U.S. interest rates, and gold prices in dollar terms have fallen by 3.2 percent.
This month, however, gold prices have begun to rebound, even although the dollar has remained strong, and with the euro down more than 9 percent this year, some analysts are tracking the price of gold in euros as an indicator of demand for hard assets. On Tuesday, spot gold was trading at around $425 per ounce and gold in euros was at 346.40.
"If gold breaks above 350 euros per ounce, that will signify the market is shunning all paper currencies", said Jes Black, hedge fund manager, with Black Flag Capital Partners LLC, Hoboken, New Jersey.
If gold were to rise above that level "what you would see is a mad rush into gold. ... It could very well spark a very large rally in gold," Black said.
The euro has come under under pressure this month after both France and the Netherlands voted against the proposed EU constitution in referendums.
Between 350 and 355 euros per ounce, an area touched several times in the last three years, "is a very, very big resistance level," which if broken "would institute a good trading opportunity," said Jordan Kotick, global head of technical analysis with Barclays Capital in New York.
Paul McLeod, vice president of precious metals at Commerzbank in New York, said he felt an initial break above 350 euros would not necessarily prove decisive, because resistance there was so strong. In recent years "gold has come a long way in U.S. dollar terms, but it has been in a relatively narrow range in euro terms between 300 and 350," he said.
"I don't believe it's a breakout until we have a couple days solidly above 350, in which case my view would change and maybe we do have some good upside technical developments taking place," McLeod added.
GOLD IN EUROS THE KEY
Any sustained rise of gold above 350 euros might be the precursor of gold climbing significantly against the dollar also, especially if $450 is breached, currency analysts say.
Meanwhile, the dollar remains strong, supported by higher interest rates in the U.S. than in Europe or Japan. But Asian currencies could attract some investment if China revalues the yuan , removing its peg to the dollar, and a weaker dollar would again provide support for gold prices.
"Gold is starting to firm up against all the currencies. Technically, that is looking very good," said one metals broker at a futures commission merchant. "Keep an eye on gold at above 350 in euro terms," he said.
Believing (and Believing and Believing) in Bullion
By Stephen Matcalf
The New York Times
Sunday, June 5, 2005
On a recent early spring morning, I made my way down to the appropriately poker-faced and austere building that houses the Federal Reserve Bank of New York. In its sub-basement, 80 feet below street level, there is a vault that rests on the granite bedrock of Manhattan. "No man-made floor could hold the weight of all this," Peter Bakstansky, a Fed spokesman, assured me. The vault holds 7,000 tons of gold. This represents the world's largest stash of the precious metal, and it is worth about $100 billion.
Gold is a majestic condenser of wealth. A standard bar is seven inches long, three and five-eighths inches wide, and about one and three-quarters inches thick. It weighs 27.4 pounds, and at the current market price -- roughly $420 a troy ounce, the unit in which gold is measured -- is worth about $170,000. As miraculous as gold is in itself -- it is soft, dense, ductile, sectile, highly conductive, all but indestructible and, of course, very beautiful -- when you look at any quantity of it, you immediately exchange it in your head for something else. One bar, college education; 10 bars, Brooklyn town house. The cage in front of me appeared fairly small. Filled to the ceiling with gold bars as it was, it might well hold the financial health of a nation in the balance.
Most of the bullion at the New York Fed is kept -- in 122 separate lockers -- in custody for foreign countries. (Most American gold is in Fort Knox.) Egyptians were casting bars of gold thousands of years ago; but the thrust of human history has been away from hard money and toward virtual money, like paper bills, or even little electronic pulses shot off by the trillion across the ether. When I remarked that all this brute physical wealth represented an anachronism, Bakstansky seized upon the word brightly.
"Yes, exactly. Gold is an anachronism."
"And yet," I said, "all these nations, they hold on to this anachronism, just in case. . . . "
To a small but extremely avid subculture in the American financial community, gold doesn't mean bling, or King Midas, or them thar hills. Gold is money; and not just money, but the one true money. The gold subculture divides along several lines -- some of its members are gold speculators, some gold hoarders, some gold philosophers… -- but it unites behind a single idea: Paper money issued by governments, when not redeemable for actual gold, is fraudulent. Most of us accept the existence of dollar bills unconsciously. To the gold faithful, however, a dollar bill is "ink money," or better yet, "fiat currency,". "Fiat currency -- it's a floating abstraction," Doug Casey, a star speaker on the gold circuit, bellowed at me over the phone. "What's its worth? I don't know what it's worth! It's a figment of some government bureaucrat's imagination!"
The "gold bugs," as they often are referred to with more than a hint of disdain, find gold appealing because they believe it represents the one enduring form of nonstate money. "Money is far too important to be left in the hands of bankers, Congress or the Federal Reserve System," Gary North, a legendary gold bug who has edited financial newsletters for decades, told me via e-mail.
I had sought out Casey and North, two leading voices among gold enthusiasts, because after 20 years during which paper assets -- stocks, bonds, and the world's leading "fiat currency," the dollar -- soared, gold was making a comeback. If you bought $10,000 worth of gold in 1980, by 2001 you would have lost $6,800. But then the long bull market in stocks ended, and the dollar, responding to the growing debt burden of the average American, not to mention the federal debt and our trade deficit, began a steep decline. And so, starting in 2001, gold, which like many commodities moves in the opposite direction of the dollar, began to recover some of its lost glamour as a store of value. The price of gold broke through the $300 barrier in February 2002, then the $400 barrier at the end of 2003. Could this be the dawn of the apocalypse that the gold bugs, whose prevailing attitude might best be described as a wishful pessimism, have been predicting? Could the dollar collapse, leaving only gold?
For the past 70 years, the United States has been conducting an experiment regarding the dollar. The experiment asks: Can the United States manage its currency responsibly, without having that currency backed by gold? The U.S. effectively went off the gold standard twice in the 20th century, and both times responsible men in positions of power foresaw cataclysm.
In fact, the recent weakness of the dollar has become an idée fixe within the gold community, as it opens up one possible route back to an economic system ballasted by gold. Representative Ron Paul, a Republican from Texas who is gold's lonely advocate in Congress, put it to me this way: "We will go back to the gold standard, even if it takes the near-destruction of the dollar to get there."
James Sinclair is a 64-year-old American businessman in a tan blazer and navy blue slacks. Among the most famous gold speculators, Sinclair proclaimed in the 70's that gold, then at $150 a troy ounce, would hit $900. (It eventually peaked at $887.50; he sold his position the following day, for a profit of more than $15 million.) Then, with some analysts predicting that gold could go as high as $2,000, he declared the gold bull market dead. (Within months, he was proved right.) In 2001, with gold near its bear-market lows, Sinclair told Forbes magazine that it could hit $430. On the day I met him, gold was trading at $434.
Sinclair regards gold with dispassion. "Gold is not to be loved or hated, accepted or refused," he said. "Gold is not barbaric or angelic. It fixes nothing in itself. But it is a mirror." Sinclair sees the health of the dollar reflected in the price of gold, and the health of the dollar is now in foreign hands. "We're not talking about what I want, but about what is," he told me, as he picked through a tuna salad. "If we go over $529, that is not good news," he said, referring to the price of gold. Sinclair says that when the dollar acts successfully as the world's currency, gold naturally returns to its status as a mere commodity. But a mismanaged dollar, he said, could cause gold to remonetize. Our world would look very different then. "The first sign is the foreign banks will diversify out of dollars. Then they will cease buying dollars. And then they will sell them." What could happen then? "Stagflation…. Expansion of U.S. federal deficit. Expenses rise and incomes drop."
Are we talking apocalypse? "The most likely crisis is the collapse in the common stock of the operating entity. In this case, the operating entity is the United States, and the common stock is its currency…Everything has its season. That includes gold."
"This is the blow-off phase for the Great Dollar Era. We're in an unsustainable trend right now," [Addison] Wiggin [editorial director of The Daily Reckoning] told me, ticking off the miscalculations that have brought us to the brink of an economic apocalypse. To begin with, the U.S. has become the world's biggest debtor, with three outstanding obligations at alarming highs: consumer debt, or our mortgages and credit cards; the federal deficit; and our current account deficit with foreign countries. Federal Reserve Chairman Alan Greenspan, Wiggin continued, has simply shifted one bubble -- the 90's bubble in stocks and bonds -- into another, in real estate and "overconsumption," or the American propensity to pay for an ever-more-lavish lifestyle on credit.
But the real nightmare involves the U.S. dollar. If Asian central banks weary of buying Treasury bonds -- an asset denominated in the weakening dollar -- then look out below. "What is that Dylan Thomas quote?" Wiggin wondered…. "The dollar will not go gently into that great night."
Wiggin offered up his analysis with a confident and steady aplomb. And for good reason. [A]t this moment, the gold bugs' grim prognosis for the dollar happens to align with a more mainstream view. A low-level panic about the debt crisis, and its possible effect on the American economy, is gathering strength. "Our little post-bubble workout is not over, not by any stretch of the imagination," Stephen Roach, the chief economist at Morgan Stanley and himself a noted pessimist, told me recently by phone. Roach says he firmly believes that an adjustment is necessary and inevitable, and that when it comes, it will be very, very painful. From appearances, Warren Buffett, the savviest investor who ever lived, agrees. His company, Berkshire Hathaway, has placed a $21 billion bet against the U.S. dollar.
Meanwhile, the general tone is darkening. In February, Paul Volcker, the former Federal Reserve chairman, publicly stated in a speech that "there are disturbing trends" undergirding the U.S. economy, including "huge imbalances, disequilibria, risks." These demand "a strong sense of monetary and fiscal discipline," he said, gently chiding both the U.S. government and its citizens to live within their means. Volcker, a man known for his prudence and a cautious tone, let his words ring ominously. "Altogether, the circumstances seem to me as dangerous and intractable as any I can remember," Volcker continued, referring to the very same warning signs as Addison Wiggin, "and I can remember quite a lot."
Recently, Comptroller General David Walker, surveying America's debt crisis, uttered a one-word synopsis for the long-term future: "Argentina." Gold, like everything else, is a commodity whose price is established by supply and demand. But gold is unlike everything else in that an ancient fantasy of solidity attaches to it.
The above information has been redacted from the original article as it originally appeared in The New York Times on June 5, 2005.
Global Economic Collapse
By Al Martin
CNBC
Friday, June 3, 2005
AL MARTIN has written an article about an interview on CNBC with the renowned funds manager Julian Robertson.
Julian Robertson formerly ran Tiger Management, the world's largest hedge fund.
Martin describes Julian Robertson as "One of the greatest of the old-timers. 53 years on the Street. He manages the Robertson group of funds. They used to call him, still do call him `Never Been Wrong' Robertson. He has predicted every economic cycle, every debacle, every bull market, and every bear market."
Martin says "Of course, he's a very old man now. But his reputation on the Street is like nothing you could imagine. When the segment of his interview was through, his comments alone took the Dow Jones down 50 points. Just on his comments alone. That's how powerful this man's reputation is."
Robertson said that he's worried about the speculative bubble in housing and the fact that more than 1/4 of all consumer spending is now sustained by that bubble, plus the fact that 20 million citizens could lose their homes in a collapse of the speculative bubble in housing, and that the Fed and, indeed, central banks worldwide would act in concert out of desperation to reinflate the global economy in the process, creating an inflationary spiral unheralded in the economic history of the planet.
"Where does it end?" Robertson was asked and he said, "Utter global collapse." Not simply economic collapse; complete disintegration of all infrastructure and of all public structures of governments. Utter, utter collapse. That the end is collapse of simply epic proportion.
In 10 years time, he said, whoever is still alive on the planet will be effectively starting again."
Bill Murphy of [Le Metropole Café] says "As for Robertson’s comments as they relate to the gold price, we will most likely see the gold price somewhere between $3,000 and $5,000 US an ounce. Wait until the facts surface about how the central banks squandered 2/3 of all their bank reserves to foster a price manipulation scheme. There will be a frenzy to own the stuff like never seen before."
I would add to Julian Robertson comments, the lucky ones will be the ones who buy gold and silver coins now, at less than $500 an ounce before the price of gold sky rockets to $3000 then $5000 and the price of silver goes over $100 in the years ahead as Julian Robertson's predictions, made in his interview on CNBC, unfold.
The above information has been redacted from the original article as it originally written by Al Martin on June 3, 2005.
Gold: The only currency that can't be printed
By Bill Fleckenstein
April 11, 2005
MSN Money
As far back as April 2003, in a speech I gave at the Las Vegas Precious-Metals Conference, I stated that gold would benefit from an inevitable economic crisis of confidence (which could be postponed but not avoided). Now, nearly two years later, it is my belief that the catalysts for this crisis are here. This week I will focus on one of them, the dollar.
The buck stops at the editorial page
Growing concerns about the dollar, in fact, prompted editorials in both The New York Times and the Financial Times (known as the FT) a week ago. The Times' April 2 editorial, "Before the Fall," takes exception to the sanguine viewpoint "that foreign central banks won't risk the losses in their dollar reserves that would occur if they started shunning dollar-based investments." In brief, the editorial warns, "the United States is betting that it's too big -- in other countries' eyes -- to fail."
The limits of foreign largesse
The Times also warns that if foreign central bankers decide to stop buying our dollars, we may need to "borrow in the face of an ever-weakening dollar -- a recipe for higher interest rates and higher prices." Further, it notes: "If the economy is in a housing bubble, as many analysts believe, higher mortgage rates would pop it, with dire results for homeowners' balance sheets and the overall health of the economy."
I suspect that "dollar bag holders," i.e., the foreign central banks, won't feel comfortable reading this, and it will strengthen their resolve to lighten their dollar positions. From a perversity-of-markets standpoint, though, the fact that the editorial board of The New York Times felt so compelled to write this editorial may mean that the dollar bounce will continue.
Meanwhile, though I have been bearish on the dollar for some time -- and think it's headed lower over time -- I would not have spoken as forcefully about the immediate future as the editorial did here: "The recent rally of the United States dollar notwithstanding, the greenback has nowhere to go but down . . . The dollar's current uptick is just a breather in its overall downward trajectory . . . The dollar is heading down, no matter what." I say that because, as anyone with any experience in the financial arena knows, in the short run, markets can do anything.
However, I think it's worth noting that The New York Times editorial page dislikes the present administration so much that it has a bit of an agenda. Thus, its argument may be seen as more political than heartfelt economic concern.
The above information has been redacted from the article as it originally appeared on MSN Money on April 11, 2005.
Richard Russel's Remarks
Dow Theory Letters
Thursday, June 2, 2005
It would be very helpful if you could address the situation of the conservative investor (someone whose greatest concern is to preserve capital). What should the conservative investor be doing in terms of whether or not to buy bonds and which currency should the investments be made in?
Best wishes,
R Stevens
Talk about a tough question, Ms. Stevens gets a gold star for this one. Let's see -- how to invest conservatively, hmmm. First, I don't know of any one or two sectors that will do the trick. If I did, I'd be fully invested in them myself, which I'm not.
Therefore, you're forced to diversify. Yeah, I know, diversification is for people who don't know where to put their money. Even Warren Buffett tends to think that way. View investing, says Buffett, as a situation where you make maybe one decision every year. No in-and-out hedge-fund-like trading, just one move every year.
OK, but I think it's a bit late for that one move. Here's they way I'd go. I'd have about half my money in cash, US dollars, and by that I mean in a money market fund, short government paper (T-bills). Then I'd have about 15 percent in gold coins or some form of gold. With the remaining 35 percent I'd probably be in a mixture of top-grade utilities, closed-end funds, preferreds, long T-bonds.
The real problem is that you've asked that question here in June 2005 when interest rates are ridiculously low and everybody is scrounging around for "safe, high yields." There isn't much in the way of safe, high yield today. It's all been locked up and put away over the last few years.
I've been saying ever since late-1999 that INCOME was going to be the operative words in coming years. For that reason, I was recommending utility stocks with juicy yields of 5-6%, preferreds, AAA munis, anything that provided subscribers with attractive income. How about closed-end funds like RCS, ACG, LBF, DUC, PFD (check BigCharts).
Yesterday the 10 year T-note surged, while yielding a lowly 3.9%. Sure that's better than what you can get in Europe, but so what, it's still not the kind of yield that leaves one drooling for more.
Of course you can just hold your money, sit tight, and hope for better yields some time in the future. The odds are that something or some sector will turn up. But as I see it, the problem is that we're facing a global slowdown, and if that's true central banks will do everything in their power to keep rates down. And so will bond buyers (which is what they've actually been doing).
Yesterday a Fed governor talked about the Fed's meeting at the end of June being "the eighth round" in the "measured" increase game, and many investors took this to be (which it wasn't) an announcement that the Fed is about finished with raising short rates. Well, maybe and maybe not. Much may depend on the real estate bubble and whether it continues to swell.
The question might legitimately be asked, "Russell, why only 15% of assets in gold?" And my answer runs like this -- Every fiat paper currency in history has ended up in the ash can. The dollar and the euro and the yen will end up the same way unless they are ultimately backed by something real like gold. Therefore, why not be invested say 50% or even more in gold?
The answer is timing. And nobody on God's green earth knows the correct timing. Look, the way it's going the US could have a trillion dollar current account deficit in a few years. We're losing our manufacturing base, we're depending on foreigners sending in $2 billion a day to sustain our spending habits, and we're facing relentless competition from foreigners in almost every sector of our economy.
On that basis we could have a dollar crisis in a six months, a year, three years, five years. But with our current account deficit running better than 6% of our GDP -- there's a crisis is out there waiting to happen.
Of course, if US consumers suddenly decide to cut back on their spending and actually switch to saving, the situation would change. The catch there is that if US consumers cut back importantly, the US would sink into recession. And with the trillions of dollars of debt now outstanding in the US, a recession would be a disaster. A recession would quickly turn into a deflationary recession, and then you're not talking about just a disaster, you're talking about a major disaster.
So where do you go for more income? Best answer -- ask your boss for a raise.
OK, let's talk markets. The problems of the European constitution, or what's left of it, are now out in the open. The French and the Dutch used their vote on the constitution as a sort of "punching bag." They're angry about immigration, about socialism, about capitalism, about European leadership, about Brussel's power -- you name it, whatever it is, they've had enough of it. The anger is out in the open, and the "No" vote has absorbed it.
So has the euro hit its low? There's a good chance that it has. If so, then the euro is probably ready to correct upwards against the dollar. The rise in gold and gold shares may be telling us that. I'm writing this on Thursday morning, so I don't know where gold will close today, but this morning as I write gold is up 5.20. We'll see if "they" can knock it down by the close.
What does the euro look like on the charts? In a word -- oversold. Gold has tended to move with the euro, and gold is higher today. Russell guess -- the euro is ready to rally.
[O]il is in position to test its recent high at 58. The P&F "count" or target for oil is now 65. If oil does hit 65, that will put major pressure on the US economy, and certainly on the owners of a few million SUVs. Oil, some call it "black gold," let's see where she goes. Just to make it more difficult, oil was down about a dollar at the close today.
The above information has been redacted from Richard Russell's Remarks as they appeared on Dow Theory Letters on June 2, 2005. Bolding added.