Steve Quayle News Alerts

October 31, 2002

More and more it looks like the gold price is going to explode. Pounding the table time about incredibly bullish gold fundamentals has been my rant for weeks. Time to ratchet up that rant a bit.

The CRB is inching its way up again, closing around 229. Commodity prices have consolidated after substantial gains over the past year and seem to be ready now to make significant new highs. Perhaps gold and silver will lead the way? Or maybe it will be soybeans that lead the charge?

Crack soybean/grain analyst Greg Pickup tells me he sees soybeans taking off from here. His reasoning is that the USDA predicted demand would be drop 20 to 25%, yet demand is running only 4% off track. Plus, the trade is looking for a large South American crop. Greg warns that while the acreage may be large, the yields may be down due to a shortage of the right fertilizers, etc.

The dollar (106.82) appears to be completing a fairly substantial topping formation. It has taken out a downtrend line and appears to be ready to TANK!!!

<http://futures.tradingcharts.com/chart/US/C2>http://futures.tradingcharts.com/chart/US/C2

A Fed rate cut next week would be all she wrote for the dollar and a tanking dollar can only put more pressure on The Gold Cartel to "give up the ghost."

Meanwhile, the physical gold market remains very firm. It is very clear that the Arabs, Indians, etc, are gearing up for a roaring gold market that is right around the corner. Oh, are the western central bankers are bunch of dopes!

This is what I mean:

*JEDDAH, 31 October ÷ The demand for gold in the Kingdom is expected to increase by more than 20 percent during the last quarter of this year, market analysts said. They attributed the increase to a growing trend to invest in gold amid fears of an imminent US attack on Iraq.

Osama Al-Wazir, director of World Gold Council for the Gulf countries, said he expected increase in gold sales over the coming months as a result of new developments in the region.

Muhammad ibn Saeed of Al-Amoudi Currency Exchange Center said there was big demand for gold coins and biscuits in recent months as many people, especially expatriates, wanted to preserve their money in the form of gold as a safe investment.

The WGC reported recently that there was a 16 percent increase in gold sales in the Kingdom and other Gulf states during the first half of this year·..-END-

*Gold legal tender coins may be coming in India
By Janaki Ghatpande & Anusha Subramanian Mumbai, 28 October

GoldQuest International, a gold numismatics company, has approached the Reserve Bank of India (RBI) for permission to mint legal tender coins in gold for collectibles market.

The company already mints legal tender coins of the Kingdom of Bhutan in gold as collectibles. In India presently no privatemint is allowed to mint the legal tender coins in gold.

The company sells only gold medallion collectibles In India at present. It is planning to widen its range of products includinglegal tender coins and watches.

The company will also lower its entry level product range to begin with$ 530 as against the international $800 to make it more affordable.

Richard Zinkiewicz, director finance, GoldQuest International, said that in India, the company also wants to create awareness about the numismatics and gold collectibles market and is looking to lower their entry level price point.

GoldQuest has set up its headquarters in Chennai. The Indian operations contribute under 10 per cent to the total turnover of US $ 160 million.

As part of its vertical growth plans, GoldQuest in India is seeking permission to set up its own private mint.

Zinkiewicz said," We are planning to expand the business and our focus is to cross the US $ 200 million mark. India, as a market, has immense potential and we are going increase our focus here," he said·

-END-

Throw the expected Chinese gold demand increase of 300 tonnes for next year on top of that mix.

To top it all off, the cabal continues to fire its gold analysts. Midyear it was Kevin Crisp and Dinsa Mehta of Morgan and Chase. Yesterday, it was Goldman Sachâs Dan McConvey. These three were very well known in the gold industry and were among the leading apologists for their corrupt bullion banks. McConvey had the perfect background for Goldman as he came there via Barrick Gold.

How can it be that we are at the end of a major bear market in gold and on the eve of the grandest gold bull market of all time, yet the most prestigious bullion banks keep firing their gold analysts??? It makes no sense on the surface. Cannot it be that these bullion banks are a just a bunch of stupids - that they have no clue what is coming? NO WAY, Jose! These crooks know better than anyone.

In my opinion, this is VERY good news for any of the following reasons:

*The Gold Cartel knows the bear gold market is over, yet they do not want to come out as bulls because:

1. of their massive gold short positions
2. they know what a roaring gold price is going to do to the financial markets.

*The Gold Cartel is ridding itself of its mouthpieces that were told to keep quiet about the gold truth all these years.

*The bullion banks in the cabal are looking for an excuse for not telling their clients to be bullish ahead of an explosive gold price move (canât fault the analysis if you have no analyst).

*They want to have some analyst to blame for their not knowing about the gold price explosion.

*They do not want the ones that know too much around when the Congressional hearings begin on the gold fraud.

The firing of McConvey, following the JPM firings, is very meaningful as far as I am concerned. The tick, tick, tick grows LOUDER. It is just one more sign that the gold derivative neutron bomb could go off at any time. What a fireworks display it is going to be!!!!!!

I donât like to see anyone get fired, but that is what they get for working for the Devil.

The John Brimelow Report

Indian ex duty premiums: AM $2.24, PM $2.29, with world gold at $316.70 and $316.40. Well above legal import level. India is providing solid support to gold, as it appears sellers just discovered in New York this morning. A Saudi newspaper carries a report of recent strong growth in that country also. See <http://www.arabnews.com/Article.asp?ID=19956>http://www.arabnews.com/Article.asp?ID=19956

TOCOM woke up this morning, as the Trade houses were able to step up their arbitrage sales into Japan: volume rose 18.2% to the equivalent of 20,734 Comex contracts. Open interest shaded down another 571 Comex equivalent, but the effect was to nudge $US gold up 55c. As Mitsui- HK remarks:

"If not for Tocom related buying which came late in the a.m., gold would have been motionless around 316.50. Buying out of Tokyo persisted in p.m. till the close where profit taking on Tocom kept market down to 317 offer."

With widespread disgruntlement over the inertia of the Japanese authorities this situation still has potential for gold. (NY traded 35,395 contracts yesterday: open interest rose 335 lots.)

To the surprise of no experienced gold observer, surprisingly soft economic data in America this morning, which routed the dollar and appreciably increased the chances of another round of contango-slicing interest rate cuts, had little effect on gold. An explosion of selling ö 23,000 contracts by 11am - has so far served to block two attempted advances. No wonder the gold equities are wilting!

A matter which deserves more attention than it is getting, particularly for gold equity holders, are the signs that South Africaâs President Mbeki is about to follow Mugabe of Zimbabwe along the well- trodden African path of government by paranoid delusion. By his completely inappropriate assumption that the string of bombings in Soweto on Tuesday were the work of "White Rightwingers" (How would they have got them in without being detected? The few bombs they did explode during the transitional election were aimed at much easier and profitable downtown targets. Factional, Criminal or even Tribal culprits are far more likely.)

Mbeki may well be signaling the start of a destructive turn in South African affairs.

Those with exposure would do well to consider <>http://www.vdare.com/misc/rushton_iq.htm , particularly the final four paragraphs.

JB

CARTEL CAPITULATION WATCH

The news just gets worse and worse. Look for the DOG and the DOW to be battered next week after the Fed makes its decision on interest rates.

Chicago, Oct. 31 (Bloomberg) -- Manufacturing in the Chicago area declined in October for a second straight month, a survey of purchasing executives showed.
The National Association of Purchasing Management-Chicago said its factory index fell to 45.9 this month from 48.1 in September. Readings below 50 mean business slowed at the region's factories.

WASHINGTON (Reuters) - The number of Americans signing up for unemployment benefits rose above expectations last week, the government said on Thursday in a report showing a weakened labor market in a fragile economy.
U.S. initial jobless claims rose by 16,000 for the week ended Oct. 26, to a seasonally adjusted 410,000, the Labor Department said. That level was higher than the 399,000 claims economists in a Reuters poll had forecast.

Frankfurt, Oct. 31 (Bloomberg) -- Deutsche Bank AG posted a third-quarter pretax loss of 181 million euros ($179 million) after Europe's largest lender set aside 753 million euros for possible loan defaults.
The third-quarter loss before taxes compares with earnings of 363 million euros in the year-earlier period, the bank said in a statement to the Frankfurt exchange. Analysts were expecting pretax earnings of 226 million euros and loan-loss provisions of 567 million euros.
Chief Executive Officer Josef Ackermann has been shedding jobs and selling businesses to try to revive profit. Earnings keep falling as insolvencies of borrowers, including German builder Philipp Holzmann AG, mount and revenue from investment banking declines.
Deutsche Bank follows rival HVB Group in reporting higher loan-loss provisions. HVB, Germany's No. 2 bank, posted a record 360 million-euro third-quarter loss as bad loan charges surged to 1.2 billion euros. öEND-

German money machine grinds to a halt
Europe's most powerful banking sector is on red alert

Mark Milner and Jill Treanor
Thursday October 31, 2002
<>The Guardian

Germany's banking system is facing a crisis of confidence. Profits are evaporating and share prices crumbling, prompting uncomfortable comparisons with Japan's troubled finance houses.
The latest indication of the German disease comes this morning from Deutsche, the country's largest and once the world's biggest bank.
There is little doubt that the third quarter figures will make grim reading. In just three months Deutsche's profits are expected to have fallen to ¥129m (£81.5m) from ¥721m, according to analysts at Lehman Brothers.
What is doubly grim is the expectation that they will still be better than those of its stock market-quoted peers, Commerzbank and HVB.

See rest of story here:

<http://www.guardian.co.uk/germany/article/0,2763,822997,00.html>http://www.guardian.co.uk/germany/article/0,2763,822997,00.html

-END-

From Laurie McGuirk in Sydney:

US warned not to seize control of Iraqi oil ..., Todayâs Sydney Morning
Herald...
October 31 2002

The chief executive of BP, Lord Browne, has warned Washington not to carve up Iraq for its own oil companies in the aftermath of any future war.

The comments from the most senior European oil executive, who has impeccable political connections in Britain, will be seen by anti-war protesters as further proof that the United States President, George Bush, has already made his mind up about an early attack.

The warning came as United Nations negotiations continued for a compromise resolution on Iraq that will satisfy Washington, Paris and Moscow.

Lord Browne's comments serve to underline concern that the US is primarily concerned with seizing control of Saddam Hussein's oil and handing it over to companies such as ExxonMobil rather than destroying his weapons of mass
destruction.

Britain's biggest company is reviewing what impact the overthrow of Saddam would have on its own business and global crude supplies. Both London and Washington have been lobbied by the British oil giant, which is concerned that European companies could be left out in the cold.

"We have let it be known that the thing we would like to make sure, if Iraq changes regime, is that there should be a level playing field for the selection of oil companies to go in there if they're needed to do the work there," Lord Browne said on Tuesday.

The jockeying for oil continued as French and United States officials scrambled behind the scenes to reach a compromise on the UN resolution. ...
END

The "war" hasnt started and they are already bitching about who gets what!!! War on Terror, bullcrap, its an "oil grab"... a mate suggested that "Its amazing that we are about to relive a carve-up that happened in the early part of last century when the French & English originally took Iraq for its oil. Colonialism at its finest."... END

The South African miners all got a bath. Durbans hardest hit down 6%,GFI -.5%, Harmony and Anglo about flat. Sovereign risk is an issue and bombs going off and Mbeki's pro-Mugabe outlook may have spooked the market. Thatâs where the leverage is though people. Take the risk, take the reward(or lack thereof). Durban Deeps is the ultimate leveraged gold play as a million ounce producer, if you have the hankering for Sth Africa! Think worthwhile picking a few up while we are down here at $2.80ish.... Gold at $400 will see DROOY at $20+ (as long as STH Africa hasnt imploded).. in my opinion. As a high cost producer, these guys get you the biggest bang for your buck, as well as a reserve base increase that is phenomenal. Marginal mines are what I want if I expect a gold breakout but balanced with some core blue-chip operations.

Laurie.

Speaking of deception, we go to Dave Lewis:

Bill;
Most people are familiar with Sir Walter Scott's couplet, "Oh, what a tangled web we weave; when first we practice to deceive!" but the preceding couplet from "Marmion" adds some flesh to those bones, "Yet Clare's sharp questions must I shun; Must separate Constance from the nun -". The idea then is that to be successful at deception you must keep people in the dark by avoiding both questions and people comparing notes. If practiced long enough in an institution as Byzantine as a modern government, you end up with a high probability of the left hand not knowing what the right hand is doing.. Take for example, the decision by the Nixon administration, to close the Gold window in order to avoid specie drain while expanding the money supply. That is, the gang working in that administration knew and wished to avoid the Gold drain that would inevitably follow such monetary stimulus. Fast forward a few decades and we have, what appears to be, bipartisan support for a de facto Gold standard during a period of rapid monetary expansion. In other words, in 30 years we have gone from closing the Gold window to avoid specie drain during rapid monetization, to a policy of selling Gold to anyone in order to maintain the fiction of US$ value during rapid monetization.

On the real sector side, I note in today's GDP release an annualized current account deficit of 437B, or roughly 109B over the quarter. Under the old settlement rules for international trade but using current prices, this imbalance would lead to a specie drain of 346K oz or 10.8T. Of course, we don't pay in Gold, we pay in US$. However, once out the door, the recipients of the US$ can use them as he/she pleases. Wouldn't it be ironic, albeit economically disastrous, if the US settles its trade gap in cash but in the course of keeping the US$ high in effect settles in Gold, thus squaring the circle from 1971.

Tangled web indeed.

regards

Dave Lewis
<http://www.chaos-onomics.com/>http://www.chaos-onomics.com

Letâs hear it for gold coins:

Hi Bill
This afternoon when I drove home from work, I saw a banner advertising a mountainbike race this weekend. In the corner of the banner I saw the following: "70km winners will be rewarded with Krugerrands".

A sign of the times ?

Regards
Charl Marais
(Stellenbosch, South Africa)

Some Halloween thoughts from one of our New England Caf&Mac218; members:

Bill,
Lately I've been a little overwrought, as you are aware, so last night being Halloween Eve I decided to sit down and try to relax. After all, Al "Freddie Kreuger" Greenspan and his Halloween rally has most investors more skittish than a bunch of equity analysts at an Eliott Spitzer deposition, and we can all hear him reviving up the chainsaw for another rate cut.
That's so scary, who needs to visit Spooky World? Why bother with the supernatural, when we can watch Chainsaw Al and his vampire buddies at the Investment Banks levitate declining markets and rout them in an up direction hundreds of point in a few short minutes?

To relax, just before midnight, I poured myself some wine, got out my calculator, lit the candle on the mantle to keep away evil spirits and sat down to read the Vanguard Group's 3rd quarter performance report. I picked that since I knew it would be plenty spooky, even though I don't own any of their mutual funds, and unlike, say, reviewing the latest New England Patriots statistics I guessed it wasn't like to put a fright in me. Sometimes it feels good knowing you don't own something.

As I burrowed into the report, my first reaction was amazement that any business people who send such a report out without a letter or profuse and abject apology. What a horror show! I thought you and Cafe readers might enjoy what I found.

Of the 86 equity or balanced funds they listed, 83 had losing records for 2002 ytd. Two of the "winners" were REIT Index funds, up all of 3.6% for the year.Fund losses mostly were over 20%, with the losses on their "growth" funds running about 39%.

They had one winning fund. You guessed it, Precious Metals, up 19.45% through 9/30.

So here is a report for their customers which shows every fund they have, including no doubt the customer's, in the dog house, and one fund with a winning record. Of course, as we know Vanguard closed the Precious Metals fund to new investors several months ago. For those of us that like conspiracy theories, that happened right as the biggest growth in short interest for gold stocks was accumulating. Of course you and I must not be in Chainsaw Al's rolladex, otherwise I'm sure he would have given us a call so we too could have gotten in on the ground floor.

Anyway, they hit 3 for 86 in equities, which isn't even in sight of the infamous Mendoza line. Their taxable and muni bond funds were positive and obviously outperformed their fine equity record.

I also took a look at the longer term performance of their funds. For their funds that have been around that long, their equity funds have averaged roughly 7.9% annually over ten years, their bond funds about 7.0% (7.6%< dropping short-term funds), and their non-short-term muni funds about 6.9%.

If we look at these returns on an after tax basis, the results are even more dramatic. Using a 30% tax rate to allow that some returns are short-term gains, some long term, and that dividends are ordinary income, I calculate that their equity funds returned 5.53% after tax, their non-short bond funds 5.32%, and their muni funds 9.86%!!! Buy and hold, my bupkiss!!

Had you invested $10k ten years ago in Vanguard equity funds you would now have $17,130 after tax; had you put in non-short term munis, you would have $25,609 after tax !! You would have gained TWICE as much in munis as you would have in stocks!

Trick or Treat!

Now. I concede my back of the envelope analysis has its limits. The candle
was burning down, my wine was almost gone, it was late. But how unbelievable is that?

With the last of my wine, I took a look at their Annual Money Market fund report, which is of some personal relevance since I do use them. Vanguard, unlike many other fund families, buys treasuries with your treasury fund money. When I used Scudder, I found out one year that most of the money was in repos, only 25% of it was state tax exempt, and the fund reps I spoke to didn't even know repos had risk (anybody remember Bevill Bresloff?).

What was most interesting was to find that the net assets in their Prime Money fund, most CP and short corporate paper had declined 1.3% for the year, while assets in their treasury funds increased by 25.4%. That should tells us all, if we don't know already is that the average Joe investor and the average small institution treasurer understands how risk is expanding, as Chainsaw Al cuts more green paper loose to pass around the system.

My candle burned out and my wine was gone. I headed for bed. I woke up this morning having a most impossible dream, almost a nightmare. I dreamed the price of gold kept going up and my gold stocks kept going down. I dreamed I looked up, and uglier than the ghost of 401k's past, I saw Chainsaw Al smiling at me. When I looked at me he revved up his chain saw and said, "Boo! The central banks stand ready to sell gold in any quantities necessary." I woke up screaming. I knew it must be Halloween.

Trick or treat.

Chris

For Caf&Mac218; members who would like to contact Bill King:

Email is <mailto:kingreport@ramkingsec.com>kingreport@ramkingsec.com; Fax number is (630) 789-6044.

Time to prepare for the New Orleans Investment Conference next week. I am looking forward to seeing Caf&Mac218; members as well as my GATA colleagues. It will be a reunion.

<http://www.neworleansconference.com/>http://www.neworleansconference.com/

We go into action early to kick off the conference (GATA Secretary/Treasurer Chris Powell arrives too late for this panel, but has his own workshop):

4:15-4:55 p.m. Warm-Up Panel
(Gold Anti-Trust Action Committee)
A panel featuring Bill Murphy, Reg Howe, Mike Bolser and James Turk
"The Long-Term Manipulation of Gold"

NO PRISONERS!

MIDAS

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October 30 - Gold $316.30 down 80 cents - Silver $4.47 down 3 cents.

Potential Fed Rate Cut Would Be VERY Gold Friendly

The general consensus is that the economic news is so bad that the Fed should lower interest rates 50 basis points next Wednesday. Goldman Sachs is throwing that assessment all over The Street, saying another 25 points is coming behind it. Therefore, the stock market put in a rally during the last 1 ¸ trading sessions. The irony is that a Fed cut may do little, if anything, to help the market in the months to come, but it surely will add fuel to the gold bonfire. US interest rates hovering slightly above zero are like kindling wood for that bonfire. Just a few reasons why such a move would be so gold friendly:

*It continues to diminish the contango for hedgers making is senseless for hedgers to roll over their hedges - that is unless they believe the price of gold will collapse. That is NOT going to happen with US interest rates so low and the gold fundamentals so explosive.

*The lower rates make gold a more competitive investment to other financial instruments. It will enhance investment demand.

*It makes the gold carry trade less attractive.

*It lessens the incentives for central banks to sell their gold, or lease it out.

*A lower rate move can only accelerate the eventual dashing of the dollar.

There are many more I am sure. The point is that gold should be jumping on the expectation of such a move. If the gold price were not rigged, that would be the case.

Todayâs gold action was typical. Gold was not allowed to go past "GO," or the unchanged level, not after three straight days of advances.

Nonetheless, it feels to me like gold is coiling up to take off some time after the election. The forces going against The Gold Cartel seem to be just too formidable.

A close above $320 will set the stage for the big assault on $330. The fireworks go off when that hurdle is cleared.

The John Brimelow Report

India ex duty premiums: AM $3.02, PM $$2.99, with world gold at $316.45 and $316.50. Very high; well above legal import level ö for once the steady flow of Indian Newspaper stories about strong festival demand might be telling the truth. Getting gold down from these levels will take very resolute physical selling.

But Japan continues uninspired: a slightly firmer yen offset goldâs NY rise: TOCOM volume fell 18.6% to the equivalent of 17,540 Comex lots and open interest declined the equivalent of 293 Comex contracts. (NY traded 35,395 contracts ö as usual a heavy day when gold tries to rally- with open interest rising, however, only 335 lots.)

One noted bullion dealer astutely underlines the key question of yesterday: how come

"·the implosion of US consumer confidence, interest rate expectations leaves Wall Street and the dollar slightly up, and gold equities barely moved, and bullion not seriously challenging $3(3)0 even on option expiry day ."

Nevertheless, gold is clearly right at major physical-demand support, and the normal thing now would be for a meaningful rally.

JB

CARTEL CAPITULATION WATCH

This sort of news only bolsters rate cut expectations:

New York, Oct. 30 (Bloomberg) -- U.S. retailers may be heading into their worst holiday season in more than a decade as job cuts and slumping stock markets have pushed consumer confidence to a nine-year low.
Best Buy Co., the largest U.S. electronics retailer, and BJ's Wholesale Club Inc., a warehouse chain that sells everything from food to appliances, are among those predicting smaller sales gains than last year, when the Sept. 11 attacks crushed hopes for the season. Macy's parent Federated Department Stores Inc. has forecast that sales may fall as much as 2 percent.
Sales growth is petering out even at discount merchants, such as Wal-Mart Stores Inc., which drew customers throughout the recession that began in March 2001. A 10-day closure of West Coast ports this month added to the woes of retailers including Gap Inc. by delaying holiday shipments. Many investors say there's scant evidence large numbers of shoppers will spend lavishly on gifts.
``I don't recall it ever being this bad, with everyone feeling so pessimistic,'' said Art Bonnel, manager of U.S. Global Investors' $80 million Bonnel Growth Fund, which sold all its retail stocks including Wal-Mart in the past four months. öEND-

The following cannot be good news for hedgers, as it will require greater hedgebook scrutiny. While only for US firms now, the requirement could easily spread to other countries as it makes so much sense:

Washington, Oct. 30 (Bloomberg) -- U.S. companies would be required to disclose off-balance-sheet debt as part of a new proposal by the Securities & Exchange Commission that was prompted in part by the collapse of Enron Corp.

The rule change would require companies with an estimated $3 trillion of debts to list the off-balance-sheet liabilities that mature in the next five years in a table as part of their annual filings with the regulator, SEC Chief Accountant Robert Herdman said in an interview.

The plan will affect General Motors Corp., Citigroup Inc., Ryder System Inc. and other companies that use special purpose entities, which help the corporations get more favorable terms on their loans while keeping the debts off the books. The financing vehicles are allowed by accounting rules as long as they are controlled by people or companies outside the corporations.

``This proposal will give investors a leg up in analyzing a company's risk profile,'' said Robert Willens, an accounting analyst at Lehman Brothers Holdings Inc. ``The wild card is whether investors will penalize the company by thinking of Enron and improperly assuming the debts always belong on the books.'' ·.

The SEC proposal on off-books partnerships dovetails with another plan by the Financial Accounting Standards Board, which writes U.S. accounting rules. The FASB proposal, issued in July, would force the debts and assets of most off-books entities to be included on the balance sheet of companies that control them.

These financing vehicles -- backed by equipment, real estate, or other assets -- help the companies get more favorable loan terms in addition to keeping the debts off the companies' books. Companies kept roughly $3 trillion in debts in special-purpose entities, according to an SEC estimate.

General Motors had assets worth a total of $136 billion in special purpose entities last year, according to the company's latest annual report. Ryder, the largest commercial truck lessor, had $454 million in off-books obligations as of June 30, the company said in a quarterly report.

-END-

This can't be good news for derivative giant JP Morgan Chase, or for GE. The stock market action of that blue chip bellwether is dreadful. GE acts like something is wrong, a la Morgan, as it closed at $25.15, down 70 cents. The price action of GM, GE and JPM bodes ill and of coming financial chaos.

Speaking of derivatives, the bad news for the big hedgers continues to mount:

Two lean years lie before Newcrest

By Scott Rochfort
October 31 2002

Newcrest Mining has warned another two lean years lie ahead of it before the company will clear its damaging hedge book position and before it extracts the first ore from its new Telfer gold project in Western Australia.
While chairman Ian Johnson said Newcrest was already on track towards posting a profit this financial year, he told shareholders at yesterday's annual meeting not to expect a significant improvement on last year's final dividend of 5c until 2004-05.
Newcrest posted a net loss of $53 million from 2001-02, including a surprise $25 million loss on currency hedging. The foreign currency hedging position meant the company lost on average $108 for every ounce of gold it sold··.

-END-

The Gold Cartelâs creation of an artificially low gold price over the past 6 years has stifled the economies of sub-Saharan Africa. As a result, there arenât enough funds to seriously begin to deal with their terrible famine and disease problems. One miner alone supports 10 to 12 other Africans. Over 100,000 miners are out of work thanks to The Gold Cartel. This is what certain of the working, fortunate ones receive for their efforts:

Former gold miners show high level of lung disease
Ronnie Morris
October 29 2002 at 08:18AM

Cape Town - Shocking findings of the prevalence of lung diseases in former gold mineworkers in the area around Umtata were made in a study conducted by the University of Transkei.

In a paper titled Patterns of Lung Disease in the Former Mine Workers of the Former Republic of Transkei , Banwari Meel, a doctor at the faculty of medicine at the University of Transkei, found that of the 300 former mineworkers selected at random for testing, 221, or 78.2 percent, suffered from lung disease.

Between May 1997 and May 1999 tests were done to determine the prevalence of lung diseases and links between the diseases and age, links between diseases and the duration of mining, and the association between silicosis and tuberculosis.

The participants ranged in age from 35 to 66 and their duration of work ranged from less than one year to 31 years.

Meel said a 1989 study asserted that the mining industry had contributed directly to the spread of disease in the rural areas by creating conditions in the mines that encouraged the spread of infection there and by repatriating those who became ill.

This indirectly contributed to the general impoverishment of the rural areas to which the infected mineworkers returned.

Meel said the spread of disease was attributable to inadequate healthcare, poverty, poor nutrition and overcrowded living conditions. The picture was further complicated by the epidemic of HIV/Aids.

From 1980 to 1989 between 1 500 and 3 500 black gold miners were certified annually under the Occupational Diseases in Mines and Works Act as having silicosis or silico-tuberculosis.

Compensation programmes that reflected the nature, extent and the severity of the health damage done to former mineworkers must be speedily put in place.

The European version of CNBC is a great deal more open than the one in the US:

Hi Bill,
this is fun
I asked a CNBC presenter the following question..

....bye the way...the "normal" recovery of the DOW could be orchestrated again by some force we' ve seen this too many times
....
this was the answer;
"..I know. Just can't really say it. .."

"W" in The Netherlands

Many Caf&Mac218; members have asked me about Mahendra recently. His latest:

PREDICTION TAKE FORM"

Gold Dinar, Valueless stocks and derivative hedgers fall

Today I want to open few more prediction which I have kept for my book "2003 World Prophesies". I felt that these are very important prediction which will be very helpful to Gold investors (short term and long term).

First let me talk about my prediction from the book:

Page 15 says: "Islamic country will launch their own currency. And also I said that Gold currency will come out. I read article about Gold Dinar by Malaysia few gold website. Yes, I agree because this is matching with my prediction. Gold Dinar will come next year. What will be the effect of Gold Dinar in World currency market and how will the world take it? And how Islam will take control of Oil and Gold if west is not waken-up now. I will let you know very soon after doing a detailed study.

On page 37 "I see a great rise coming in Gold and gold stocks. By end of year 2002, Gold will go above $350 an ounce and in next five years it will reach a wonderful price of $1500 an ounce".

I said that Gold will reach $350 and above by the year 2002, and I am sure it will get there. So this is a very strong message for those who are optimistic about my gold predictions to reach $1500 an ounce in next 5 years. Also the hedgers should take my prediction seriously.

I think I want to be very clear here that my world stock market predictions are just for a short term. Overall the world market will be on the down side. Next year Dow index will go down to 5950. May technology will remain stable a little bit because they fell drastically in 2001/2 and currently they are valueless. So I am not predicting a good future for the world stock market. This will also be one of reason for Gold to cross even $1500.

As I said in September 2001 and early 2002 that US Dollar will lose charm against key currencies. I predicted that Euro would reach 1 to 1 in year 2002 when it was 0.83. Today I am predicting again that Euro will reach 1.28 against US dollar and gold will gain against all currency. I will explain soon how?

The Gold and silver prediction will come true. Unlike any other item in the world of market the forces in Gold and silver are Titanic on both the bullish and bearish sides. Regardless of those huge and powerful forces that would oppose the rise in the prices of the noble metal, its future is written in the cement of DESTINY. My predictions will be correct in the time frame that have been made. To oppose Destiny is to guarantee your own self destruction as the agents of the opposition to gold will learn if they do not listen to me. It has been said by some that "the difference between a millionaire and billionaire is the quality of their astrological advise." It would be wise for the gold derivative dealers and the gold producer derivative hedgers to listen more carefully to my predictions in their own best interest.

I have full faith and confidence in my prophecy that is why I have chosen 28th November 2002 for launching my book.

Thanks & God Bless

Mahendra Sharma
<http://www.mahendraprophecy.com/>www.mahendraprophecy.com
30th October 2002

We shall see.

The venerable Richard Russell this evening:

A lot of people are hoping that the worst is over, and that this bear market is history. Unfortunately, it's not going to be that easy. The problem, at least the number one problem, is that stocks are still expensive. As I noted in a recent site, the new S&P "core earnings" for the S&P are $18.48. On that basis the S&P is selling for a ridiculous 48 times earnings. You want to be more conservative? Then take the S&P P/E as listed in Barron's at 33 times earnings. That's also ridiculous. The simple fact is that stocks remain hugely overvalued.

My guess is that almost every class and type of asset will be hurt. I've taken refuge in bonds and gold. Bonds because I think the Fed is going to drive rates down in Japan-like fashion. So far I've been right. But with the money that the bonds are throwing off I put into T-bills and gold.

Why gold? Because if this nation lapses into deflation, debt is going to be crushed, wiped out. People will be looking for something that is immune to bankruptcy. That something is gold, the only financial assets that can't be bankrupted because gold is pure money, cash. Gold has a 5000 year history of being accepted as real money. Nothing else qualifies. Nothing takes the place of gold.

But what if the Fed is successful in inflating us out of danger-- I don't think this can happen. But if it does happen, then the dollar will buy progressively less and gold will tend to hold is purchasing power. Let me put it this way -- either way you can't afford not to have gold. It's as simple as that.

-END-

Laurie McGuirk this evening, or morning, depending on where you live in the world:

Gold very quiet all night hovering at $316-317 all nite. Silver slipped a cent. The CRB rose a little on livestock price rises, both pork and beef. These rises were off-set by wheat, sugar and corn falling. Someone must be certain its gunna rain one day soon. Crude oil off a little although Natural Gas was up some +2% which is interesting approaching the colder months for North America. Could see plenty higher in Gas if the cards fall as expected.

Gold and Silver stocks did not much on the day. A bag of mixed lollies from what I see.A few up 2% a few down 2%....fair enough, no drivers so would expect same. Massive physical demand from India, Russia, Turkey and Asia generally,have placed a solid floor under gold at current levels.

I see the new guy at IBM reckons the global economy has seen the bottom and so is gonna spend $10Billion on increasing sales of "on demand computer services", whatever the bloody hell that is. Maybe they should just top up their pension plan instead! He makes his economic assumption based on his "travels around the world". Funny that, I've travelled a few hundred thousand miles the past year or two and I dont see it that way. Maybe I'm not clutching at straws like this bloke? Talking up the market, cant have the old boss leaving with worthless stock options!

The SEC is blabbing about making companies disclose their off balance sheet debt. Good luck. Banks have total frigging departments fully devoted to doing these sorts of deals and making them "invisible". Securitisation/structured finance/financial Engineering ...whatever ...talk about pissing in the wind. Go after the bank securitisations first! Then look at the Real Estate mortgage securitisations, then go to the IBM's of the world... Auditors cant find em so how is some SEC technocrat gunna find anything?.... Smoke and mirrors and they're just blowing smoke up our backsides sounding like they will "protect the investor" ... yeah right, pass the beer nuts!.

Laurie

Dave Lewis on inflation:

Bill;
James Sinclair's essay on the need to stick to your guns today inspired some thinking of my own on the lags involved in economic changes. As Mises, who lived through the inflationism of the Weimar Republic, so clearly details, inflationism, or the purposeful depreciation of the medium of exchange's purchasing power, serves to distort the matrix of relative prices which guide the actions of both producers and consumers. Extended periods of inflationism turns the market economy into a Frankenstein-like double responding reflexively to electric charges of credit. As we saw in the US during the 70s, the adjustment process following years of repressed market clearing action is long and painful, and as Japan is demonstrating now, can only be extended further by government interference. The moral of the story is that you can't fix what is not thought to be broken.

As I keep learning from speaking to local friends who have lost money in the stock market, time and financial pain are often prerequisites to a change of mind. Yet, the goal of inflationism is to stall that necessary mental adjustment, creating an illusion of prosperity. To illustrate this gap consider this essay from F.A. Hayek, "<http://www.mises.org/tradcycl/avoidinf.asp>Can we still avoid Inflation ", written in 1970 and the appointment of Volcker and his tight money approach in 1979. That is, certain economists were well aware of the risks long before it was remotely apparent in government data and yet the population needed to go through a great deal of pain before it could come to grips with what was needed. While it is easy to get carried away with the day to day price changes, the end game of inflationism is a long, painful process which has just barely begun.

regards

Dave Lewis
<http://www.chaos-onomics.com/>http://www.chaos-onomics.com

DL inspired me to go the same route!

It is time to touch on the coming gold scandal again. IT IS NOT IN "THE MARKET" IN ANY WAY. Only The Cafe/GATA camp realizes what has happened, what is coming and why! There is constant debate by the Wall Street pundits as to whether most of the corporate scandal news, etc, is behind us. The answer is, "No, IT IS NOT!"

The gold scandal, which will be bigger than all the other corporate scandals put together, is still on the horizon and the investment community is not prepared for what is coming. There will be no reasonable explanation for a gold price explosion. The bullion houses, the supposed experts, are officially neutral to bearish. You might find a bull somewhere looking for $330. What are they going to say when gold goes $400 bid in a blink?

Any sort of rationale for that sort of stunning price action will be DEVASTATING for Wall Street:

*If the analysis is we are headed into an inflationary period, then the P/E ratios of US stocks will have to be viewed as grossly overvalued. I say that because the extraordinarily high P/Eâs are justified by Wall Street bulls today due to low interest rates and a supposed lack of inflation. Once an inflation scenario is factored into the P/E picture, stock prices will be hit hard unless earnings suddenly soar. Wall Street bulls ought to panic. The smart ones will do so quickly.

*If the analysis is there is no inflation, but that gold has been held at artificially low prices for many years and is adjusting to correct that situation, it unleashes everything GATA has said for so long. It will call into question our governmentâs integrity, State Department issues, anti-trust issues, free market trading issues, the integrity of the Comex, etc, etc. There will have to be an investigation into the activities of certain bullion banks. Actually, they can continue their present investigations when it comes to JPM, Citi and Goldman Sachs ö they just need add a new category.

The gold scandal will also dwarf all the others because it is more than a US story. It will be an international one. Unfortunately, Americans will be paying a stiff price for the stupid, arrogant and crooked dealings of certain bullion bankers and some shortsighted politicians.

MIDAS

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October 29 - Gold $317.10 up $2 - Silver $4.50 up 10 cents.

The Return of Hung Fat and Dr. No

For the second day in a row, gold rose exactly $2. That follows a $3 pop on Friday. Gold has risen quietly, almost in controlled fashion ö a bit spookily I would say, especially if I was a big short. It seems to me that the big hedge fund buyers, led by Hung Fat and Dr. No, have moved back in for The Gold Cartel kill. They appear to be making their move and accumulating gold ahead of our elections, perhaps thinking the Bush Administration will be beating the war drums soon after they are over. Alternatively, perhaps they simply know that the Bush Administration will no longer be able to cap gold after the elections.

These buyers are very aware of cabal tactics, one of which is their $2 capping rule. Since Hung Fat, Dr. No and friends can get all the supply they want at those prices on a given day, there is no reason to be overly aggressive.

One has to wonder what the cabal could be possibly thinking. What is their end game? The gold fundamentals are explosive. They must know that by now. The question is, "are they finally just flat out running out of physical to continue their fraud; i,e. are they out of ammo?"

If gold takes out $320 in the next few days, I would say the answer to that question is "yes."

Of note is the fact that gold moved higher once again while commodity prices fell and the dollar remained steady. That is another sign that smart buyers Hung Fat and Dr. No have re-entered the gold arena.

Someone asked today, "What about the tepid action of the gold shares?" My guess is they will act lousy until gold takes out $330. My reasoning is that anyone who sold his or her gold shares over the past years when gold was trading in the $325 area did the right thing in retrospect. Profits were booked. Many of those same repositioned traders and many new ones that left money on the table the last go around will probably sell into the next run-up too. That is how many gold share investors will take themselves out of position for one of the grandest market moves of all time.

That is why I sit tight. $1 gold stocks will be $2 and $3 dollar gold stocks in a blink.

Not long down the road, those very same stocks will trade $8, $9 and $10 and then go on from there!!!!!!!

My scenario for gold taking out $330 is a steady dollar, the commercials mega-short and the gold shares acting poorly. We shall see. One thing for sure, the current scenario makes it much easier for Hung Fat and Dr. No to do their stealth buying. The potential competition gold buyers wonât "get it" until gold is $350 to $400 bid. By then HF and Dr. No will have had their fill and will watch the panicked shorts and new buyers compete for what dwindling gold supply is brought to market. By then, gold will trade higher in $1 per oz increments at time.

The John Brimelow Report

Indian ex duty premiums: AM $2.98, PM $3.04, with world gold at $315.25 and $316.50. Very high ö almost lavish for legal imports. The Indian buying season is in full swing, but even so this is a robust performance, considering prices have been rising.

Japan on Tuesday continued to be uninspiring. Nihon Unicom grumbled:

ãTokyo gold had mixed performance and ended the day a little lower. It started the day lower amid the sharp gain of the JPY, and turned up slightly with the support from firm London cash price around $315 and the halt of Yen gain.ä

The effect of goldâs steadiness offshore was that the Trade houses got a good deal of arbitrage done: volume rose 44% to the equivalent of 21,537 Comex contracts; open interest edged down the equivalent of 177 Comex lots; $US gold edged up 30c. (NY on Monday traded 22,405 lots: open interest rose 1,214 lots.)

ãQuite why gold continues to rally is slightly mysterious to me·ä rather charmingly admitted UBS Warburgâs John Reade early on Tuesday. Reviewing the end of the NY day, the mystery was rather why a day presenting such reflation-suggesting US economic data, which was also an OTC option expiry day, and furthermore enlivened by another slump in the dollar as NY opened, did not see gold build further on itsâ technical breakout achieved so early. Why the gold shares slumped so badly after the gold close, and where the dramatic Dow rally in the last hour came from, are also questions bearing thought. The Dow Jones observation: ãdecent levels of bank selling were noted into the strength to limit goldâs upsideä explains how but not why.

JB

CARTEL CAPITULATION WATCH

Talk about bad news:

Washington, Oct. 29 (Bloomberg) -- U.S. consumer confidence in October plunged to a nine-year low as job cuts and expectations of declining incomes undermined faith in the economic recovery.
The Conference Board's consumer confidence index decreased to 79.4 from a revised 93.7 in September. The 14.3-point slump was the biggest since the terrorist attacks. It was the fifth straight decrease and reflected declines in consumers' assessments of present conditions and their expectations for the next six months.
öEND-

Actually, the news was not that bad according to the CNBC crowd because this is retro news. Hello? Talk about denial!

Another miracle Dow rally late in the afternoon. How obvious can a rigging operation be for gosh sakes? The DOW, DOG, S&P and Morgan were all down sharply and headed into oblivion when the PPT showed up to do its revolting DOW boost. A fellow Caf&Mac218; member says it well:

Another day, another rescue around 2:30 PM or so. They are disgusting and arrogant in their blatant manipulation of the market. Newmont is a good proxy for when this will happen. When Newmont is weak in the morning when all other golds are strong, you know that there is a turnaround for the market in the making.

It has played out this way each time this scenario occurs, if you keep an eye out you will see the same thing. It is as if the insiders know that the market is going to be juiced late in the day, so they get out of their defensive gold position in Newmont early. Each time it happens it makes me sick to my stomach, but I have learned to trade around it and lighten up on my general shorts in the market.

They are disgusting and they will fail.

A. DeLuca
CT

A. DeLuca was not alone in his disgust:

I had a little nap that lasted about an hour and twenty minutes.
I woke up to find the HUI negative and the DOW positive....and gold and silver both down in the NY Access Market.
How blatantly manipulative can you get. Consumer confidence came out a nine-year low, the DOW was doing a death plunge until it got to that magic 8200 mark, then "the boys" turned it around, and had to come in twice more during the day, or it would have fallen off the proverbial cliff again.
But to have the audacity to actually take the average positive on a day like today, is criminal.
America is finished.

Ed Steer

The Dow ended flat, while the DOG was tagged for 15 and the S&P for 8.

JPM broke $20 again EARLY before the rescue squad showed up. In the end, it will do Morgan no good. More and more of the investment world have them figured out:

From <http://www.briefing.com/index_MSN.htm>Briefing.com:

Market Report -- In Play (JPM)
October 29, 2002 08:40:00 AM ET
JP Morgan Chase CFO pessimistic about capital mkts - Prudential (JPM) 21.25: Prudential says that JPM's CFO was "quite pessimistic" about the capital mkts outlook during a meeting with the firm, and looks for the co to adjust to this reality; firm senses that long-term growth targets may be lowered. Price target is $18.
öEND-

From Fortune Magazine:

FORTUNE
Monday, November 11, 2002
By Janet Guyon

Waves of Doubt
Complicated financing deals were supposed to protect insurers and banks. Now they're another reason investors are jumping ship.

<http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=210042>http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=210042

*****

Morgan still closed down 81 cents at $20.44. Meanwhile, Cousin Barrick Gold really stunk up the place, closing at $15.08, down 43 cents.

Good stuff from The King Report. Bill lives on a different planet than the Wall Street crowd. Both supposedly look at the same data. His analysis has been right-on for years, while the Wall Streeter bulls have been all wrong. How can that be over and over again? From his latest last evening:

We alluded to a troubling factor that lurks, and perhaps itâs knowledge of that factor that vexes Fed officials and induces astute operators to act. We stated that Q3 earnings comparisons are easy due to 9/11 but Q4 would be difficult due to the stimulus enacted after 9/11. Specifically, GM inaugurated zero-rate auto financing last October. Analysts expect October auto sales to fall 25-30% y/y. The same element could affect housing sales. Robust housing and auto sales kept the US economy from falling into the abyss last year. The solons now fear those economic drivers are spent.

Mondayâs missive mentioned that stocksâ technicals had softened last week. Apparently those sensitive to economics fed stocks into wise guy buying. Negative surprises are characteristic of a bear market.

Monday was an important day for the markets, for the above reasons. Fundamental reality muscled aside technical and seasonal enticements. The market reaffirmed that this is a secular bear market and post-bubble aftermath by not only refusing to rally on advertisement of a Fed rate cut, but by staging a decline. THE BOTTOM is still a distant dream.

AXP beat estimates by the now standard but dubious 1 cent. And how did they do it? AXP reserved 5.8% less for uncollectible loans. The stock rose 3.4%. Some credit card issuers take the hits others finagle. As Uncle Miltie said, "You can fool some of the people all the time, but thatâs good enough."

Qwest will write down its assets by $40.8B, due to the decline in value for its acquisitions and networks. Gee, are they the only Înew economyâ company that has badly deteriorating assets?

Today should be soft, as operators resolve ebbs and PMs wait until Wednesday PM to commence performance gaming for Thursdayâs month end and yearned for some large mutual fund complexes. PS- IBM was marked up 5 points the last 2 days. Guess we know wise guysâ favorite trading sardine.

Argentine and IMF officials on Monday tried to formulate a deal that would avert a debt default in two weeks. Argentina wants the IMF to relax its demands for utility rate hikes, budget cuts and bank bailouts.

-END-

Then again, why should the Wall Street crowd worry? If the performance is bad, eliminate it from public scrutiny:

By Harriet Johnson Brackey
<http://www.miami.com/mld/miamiherald/4371474.htm>Making the losses disappear

Hate your mutual funds?

No worry. They may just disappear.
It's the mutual-fund industry's way of handling problems.
They merge bad funds with better ones or liquidate them altogether.
Either way, fund companies get to clean up their performance records by eliminating the worst of the worst. The now-you-see-it, now-you-don't trick is amazingly common, especially this year.
As of last week, for every four mutual funds that still exist, one has disappeared since the bear market began in March of 2000.
This is from research by Morningstar, a Chicago mutual-fund tracking firm.
In fact, the number of funds that were here 2 ¸ years ago but are now gone, which is 1,590, is getting close to the total number of funds that disappeared in the previous 18 years that Morningstar has been tracking mutual funds. That total is 1,907. Morningstar says 5,931 mutual funds are in business today.
You may even be involved in this little maneuver. Seeking approval from shareholders for a fund liquidation or merger is the most common question on this season's proxy ballots, says a recent article in Mutual Fund Market News.
Once a fund is merged with another, the company no longer has to report the original fund's results to shareholders. The new fund's record takes over.
''In my view, this is something of a black eye for the fund industry,'' said Norm Fosback, a Palm Beach-based newsletter publisher who has been tracking the industry for more than two decades. ``Even in good times, they tend to merge bad-performing funds into good-performing funds, to erase the history books of their poor track records. Now, of course, every fund has a bad track record. And the question is, which ones are the worst.''

-END-

This is not good and reveals the hypocritical Bush Administration for what it really is:

US weapons secrets exposed
<http://www.guardian.co.uk/usa/story/0,12271,821306,00.html>http://www.guardian.co.uk/usa/story/0,12271,821306,00.html
Julian Borger in Washington
Tuesday October 29, 2002
The Guardian <<http://www.guardian.co.uk/>http://www.guardian.co.uk>

Facts from the World Gold Council:

Gold sold under Washington deal at 60% of total

Marking the third anniversary of the Washington Agreement on Gold (WAG), the World Gold Council (WGC) reports that total sales under the agreement so far (from October 1999 to September 2002) amounted to 60% of the 2000 t scheduled for its five-year term.This figure translates into 1 197 t sold, with Switzerland having sold 603 t, the UK 345 t, Netherlands 136 t, Austria 90 t and Germany 23 t.Considering that Germanyâs gold sales resulted solely from the demand for gold for the minting of commemorative coins, its reported sale of 23 t seems high, yet the WGC says it reflects the strong demand for the special D-mark coins as the national currency was replaced by the euro.
Swiss gold sales under WAG reflect 283 t sold in the third year, 200 t in the second and 120 in the first year. The total of 603 t sold raised just over $6,1-billion. The Swiss National Bank announced plans to sell a further 283 t in the fourth year of the agreement.
This plan would leave the Netherlands, the only other major seller with gold to dispose under WAG, with a possible 117 t to sell in year four.
It is predicted that the remaining 803 t of gold, under the agreement, will be sold by Switzerland and the Netherlands, with 639 t and 164 t respectively, between October 2002 and September 2004·.

-END-

What a bunch of dummies! Dumping $300 gold, for what? While they sell, the Russians, Chinese, Arabs, Turks and Indians buy. These western central bankers are going to look very SHEEPISH next year.

This is an example of what I am referring to:

China loosens grip on gold, Shanghai exchange ready
Monday October 28, 2:17 am ET
By Kathleen Kearney

HONG KONG, Oct 28 (Reuters) - China formally launches trading in physical gold on the Shanghai Gold Exchange on Wednesday, a long-awaited move and a significant milestone in liberalisation of precious metals trading and reform of its financial markets.

The opening of the exchange will be the first big step on the road to ending more than 50 years of absolute control over gold trading in China by the central bank. It will be the second exchange in the world to trade only physical gold.

The other is Turkey's Grand Bazaar in Istanbul, where physical gold is sought as a hard currency in the hectic world of Middle East trade.

The China Foreign Exchange Trade System Building, the gold exchange's first home, will serve one of the five largest gold producers in the world. Membership is initially limited to 108 domestic entities, Yin Po, an exchange official told Reuters.

About a quarter of members are from the gold mining industry, 56 percent are end-users including jewellery makers, and 12 percent are banks and other financial institutions, Yin said. Gold refineries and coin minters make up the remainder.

These members signed up nearly one year ago and have been conducting simulated trading since November 28 last year.

Trading will initially be limited to three or four types of physical gold and settlement permitted only in physical gold.

The exchange is also permitted to trade physical silver and platinum, and those products may be offered once smooth gold trading is established, Yin said.

PBOC'S ROLE

On Wednesday, the People's Bank of China (PBOC) will give up its role as the sole fixer of the domestic gold price. The PBOC used to set the domestic price of gold at irregular intervals.

Then, ahead of the gold market opening, it began to set the domestic buying and selling prices at weekly fixings every Monday since June 2001. It also made some unscheduled fixings.

Now the exchange will be taking over the price discovery role and the nation's gold industry will be thrown from its cozy protected world, where all output was sold to the central bank at a fixed price, into the cut-throat world of efficient markets.

"The opening of the gold exchange will enable China to keep its gold price closer to the international price," said Chen Shufang, analyst at Antaike Information Development Co Ltd.

"For producers, they will be taking on greater risk if they cannot adjust, but there will be benefits for those that can correctly judge the gold price trend," Chen said.

The central bank is thought to have set aside a portion of its 456 tonnes of gold reserves to stabilise the market in times of great volatility and uncertainty, said one Hong Kong banker.

China produces about 180 tonnes of gold a year, chiefly from mines in the northeast and northwest of the country. The country's mines will now sell their output on the exchange and not directly to the PBOC as stipulated previously by law.

PROBLEM AREAS

Over the past year or more, the gold industry has struggled with several thorny issues, including the need for hedging by the designated settlement banks and whether to exact the nation's ubiquitous value-added tax on gold transactions.

The VAT has been waived. But settlement banks, Industrial and Commercial Bank of China (ICBC), Construction Bank of China, the Bank of China and Agriculture Bank will initially not be allowed to hedge their exposure on overseas markets.

"Transactions will only be among (exchange) members and so there is no big need for hedging or arbitrage," said Jason Wong, senior manager and head of bullion at Bank of China Hong Kong.

Market-making on the new exchange will be done by the commercial bank members, while the PBOC will stand ready to step in if and when the market becomes too volatile, Yin said.

Gold's value as a reserve currency or asset of central banks, and as an investment vehicle for others, has diminished over the years, but it still has a role to play and this small opening of the gold market may carry some risks for the yuan currency.

Businesses, investors and individuals may choose to buy gold -- and thereby sell yuan -- if they believe a devaluation or depreciation in the yuan currency is on the way.

Hong Kong's gold traders have forecast China's gold demand could soar to 500 tonnes from the current 200 tonnes as a result of such safe-haven buying.

-END-

First Gold Spot Transaction of ICBC Successful

------------------------------------------------------------------------

Story Filed: Monday, October 28, 2002 10:45 AM EST

BEIJING, Oct 28, 2002 (SinoCast via COMTEX) -- During the second trial operation session of Shanghai gold Exchange on October 22, the Shanghai Branch of Industrial and Commercial Bank of China (ICBC) purchased 3 kilogram of AU 99.95 gold with RMB 250,500. The price was RMB 83.50 per gram.

It is said that this is the first time a Chinese commercial bank participating in the gold market. And it starts the gold spot transaction business of commercial banks in China·· -END-

Why are gold and silver the only financial markets that have not returned to their pre-9/11 hours?

Bill,
I was reading one of the articles on the Cafe and one person wondered why the COMEX was not open back to regular days. So, I decided to ask them and here is what they said....

From: Exchange Information [mailto:Marketing@NYMEX.com]
Sent: Monday, October 28, 2002 9:47 AM
To: 'Rick Florance'
Subject: RE: Questions & Comments from nymex.com

The Exchange considers the current trading hours to be official schedule at this time. There are no plans to change the hours at this time.

-END-

Laurie McGuirk from Sydney:

Talk of another interest rate cut, even 50bps. Who gives a toss. If 11 rate cuts cant get stuff moving then 12 wont make any kind of difference. from ABN Amro...

"Monetary policy is particularly ineffectual when it is battling an asset-market bubble, because the core of the adjustment is deleveraging. When businesses and/or consumers are cutting their debt because they've got too much, the cost of that debt is a secondary issue. Secondly, earnings remain poor. As Chuck Hill from First Call has reiterated in his latest review of the reporting season, the only thing exceptional about this season has been the extent of the downgrades before-hand, not the fact that companies have beat analysts' estimates. Third, lower short rates open up the prospect of further declines in long-end yields, confusing the case for asset allocators.

With cash rates at 1’-1¸%, there's quite a nice yield pick-up by buying a 10 year Treasury bond yielding 4.10%. That seems to be what banks are doing. As this week's Economist notes, commercial banks are now holding securities (largely Treasuries) worth around 40% of their lending. Far better to buy a bond than to lend to business. Fourth, it's noticeable how quickly sentiment towards equities has swung around ? which is a sign that Wall Street hasn't made a final low. Our regional technician, Mark Stevenson, notes that the Investors Intelligence weekly poll of equity sentiment reached an 8 year low on 11 October, but a week later was already reporting that there were more bulls than bears. In contrast, through the
final phase of the bull market, the same poll was bearish for 45 weeks. In other words, sentiment is a good contrary indicator, and its bullish reading is another reason to think that the rally won't last. Overall, the fact that earnings will remain under pressure, while equities don't look cheap on an absolute basis, and sentiment is yet to capitulate, all suggest that the another Fed rate cut will not end this bear market.".. END

Silver up to 4.50 pre lunch.... was sub 4.30 only 2 weeks back.... $10-$15 per oz will happen at some stage imminently(maybe a year, maybe next week) when the supply/demand equation is worked through and the Comex issues are addressed. There is no stockpiles although (everyone looks at China for supply, good luck) unlike 1970 when the USA had more silver than God. The US announced that it would be buying silver in the market for the first time in 30 odd years and the price FELL 20%... logical! Wiring will take millions and millions of ounces, medicinal for burns, electrics, computers and photography... and it disappears unlike gold! Silver will outperform gold as it is "poor mans gold" so "any port in a storm" as they say in yachtie circles, will have many run at silver too.

LM

Dave Lewis read my mind:

Bill;
What a difference a few days make in our smoke and mirrors economy. With the Fed's mouthpieces, such as Berry in the Washington Post, signaling <http://www.washingtonpost.com/wp-dyn/articles/A19446-2002Oct25.html>an imminent rate cut , Pavlov's traders went to work, drooling over themselves to place the trades sure to win once the Fed waves its magic wand. Yet, as Pavlov discovered, some of the dogs were beginning to wonder, "where's the beef!" Despite what appear to be fairly transparent efforts to prop up the stock market via equity futures, fears of getting caught holding the bag, now magnified by the lack of rate cut bullishness, are leading to even wilder swings. As election day nears, watch for even more volatility as the hot potato of equity ownership gets even hotter.

On the Gold side, the rate cut rumours led to a rise consistent with classical theory, i.e. up. With apparent intervention over the past week or so driving the funds into a short posture, and with $330 really quite near, the fuse once again seems lit. As we saw during the unwinding of Nixon's wage and price controls, the longer the market is not allowed to work, the greater the real sector dysfunction becomes. With the enforced deflation, via Gold price suppression, squeezing the life out of commerce, as the next few batches of real sector data should attest, and with Fed rate cut magic fooling fewer people, I would imagine that even die hard fiat money types are beginning to ask, "do we have an exit strategy?"

regards
Dave Lewis

Gold has gapped up on the last three U.S. openings, left those gaps and closed higher three days in a row. That is unusual. The ideal scene for tomorrow would be for gold to come in slightly lower and then take off for $320. Good dreamin' stuff anyway.

MIDAS

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