March 31, 2004

The common reasons given for the unexpected vault out rather than chop out of gold from below $390 is given by the establishment investment bank gold bulls as:

1. Asset prices are rising in dollar terms.

2. Currencies are rising in dollar terms.

3. 1% interest rates will drive a second wave inflation rise in the US.

4. The second phase inflation rise, aided by the percolation of higher oil prices through all phases of the economic process, will now give credence to a durable period of a new inflationary mindset.

5. The combination of a weak (on balance) dollar and new inflationary expectations will impact gold prices into a new phase of expansion.
To the above allow me add # 6: The growing plurality of "HATE."

Normally, wars are made between politicians and the people that fight them. Old men have historically sent young men and women to die for a multitude of reasons from economics to politics. Today, war has taken on a religious fever of unleashed hatred. It may have started the same way as all previous wars based on the economics of oil, but this time it is the "Hatred of the People" that has begun to take over the conspiracy of the old.

As an example, "Tyrant 1" writing on Kitco took me to task for having pointed out that the elimination by force of the Hamas leader and cleric may well have been an event that will be deemed comparable to the assassination of Arch Duke Ferdinand. I attempted to point out that the general populace holding a different view of the world would react violently. Mr/ Ms/Mrs "Tyrant 1" did not understand that this remark was not focused on saying either side in that affair was correct in the endless strategy of "An Eye for an Eye." If that was an effective strategy, why does the killing continue unabated? I guess when there is one eye left it will be declared to have succeeded.

So allow me to take the gloves off. You will recall that I strongly recommended to you a book titled, "One Point Safe" by Andrew and Leslie Cockburn. This book was on the New York Times Best Seller list when it was published but strangely enough it never entered a second printing.

This book is purportedly based on first hand reporting, classified documents obtained under the Freedom of Information Act in which these writers take the reader on a tour of deadly potentials; couriers crossing Central Europe with suitcases full of materials more lethal than any known virus on this planet; a Serbian warehouse littered with raw materials for twenty-three thousand Hiroshimas and the fanatical terrorist that had already built one radioactive bomb. Then it is revealed how the US intelligence has recognized with horror that among those involved in the business of nuclear smuggling is an organization born out of the old KGB headed by a man described by one high ranking official as "the most dangerous man in the world."

This book named names, attesting to the number of suitcase nuclear devices then missing from the Soviet Nuclear Arsenal. It traces the trading of these items to an over-the-counter market in Vienna. Not one of these suitcase bombs has yet been recovered. Clearly, whoever holds these now is not a kind and caring person or charitable organization.

What "Tyrant 1" fails to grasp is that it is not the US government that holds these bombs. More than likely it is not the Israelis that hold these bombs. So as the "Hate" grows and the strategy of " An Eye for an Eye" is exercised by both sides in the Middle East Conflict, we grow dangerously closer to a nuclear war more apt to affect the Middle East and Europe (because of lax security measures) than anywhere else.

Up to now the degree of retaliation for such an unthinkable event has been an effective deterrent. If the Iraq War has a good defense, then the degree of assumed retaliation is it.

However, of the more than 37 suitcase nuclear devices considered lost, most traded in Vienna in the early 90s. Some have to be in the hands of the terribly rich but possibly criminally insane.

My problem lies in the fact that all the reasons given today by the intelligentsia of investment banks for gold's rise are simply manufactured as they all existed when I was buying gold on the recent Thursday low with all available resources at hand. The reasons given today are a product of the rise of the price of gold itself and I fear not the reasons why gold has risen. As an example, the USDX degree of depreciation and the Euro lack of appreciation since the Spanish bombing but even before DOES NOT SUPPORT THE PRESENT ANGLE OF ASCENT IN THE RISE OF GOLD'S PRICE.

The narrow minded "Tyrant 1" types would probably never consider reading the Koran to understand the mindset of the other side. Do you know that a good Islamic would hold gold and shun paper as a religious duty. As the call to war among Islamic world populations grows louder, the general Islamic who may not wish or be able to wage war will desire to become in the eyes of his countrymen at the very least a good Islamic person. Have you noticed that the decline in gold ended with the Hamas affair?

In conclusion, I know that gold is headed to a specific price above $480. Where I am concerned, there is no question whatsoever about that. I even believe I know when it could occur. However, if the price of gold goes through $430.30 and $435 right here and now, then my fear is simple. It is the "Sum of all Fears" in the Middle East and yes, in Europe, where it is least expected.

Gold cannot get through the $430.30 mountain of supply in the cash market and right above there at $435 unless the cork is already out of the bottle. This is a time when the gold market in terms of what it does in the next eight trading days will define the state of geopolitical risk and not the other way around.

God protect all of us from the rise of the ultimate demons in a nuclear age of madness, narrow minds, hate and rampant secularism.

What a lousy reason to have to say you must own gold!