Forum Archive Index - January 2004

["Baa Baa" <baa_baa@hotmail.com>]

C T,

The answer to the question depends on ones perspective, but for me, it's 
when the monthly gold prices closes above $NZ800. At present, Gold is 
considered to be in a bull market when priced in USD, however, some of the 
long hands would still argue gold monthly close over $US420 = bull, which it 
hasn't quite done yet. This is what I call the 'forex effect'. What the US 
gold price bringeth, the NZ/US exchange rate taketh away.

Nevertheless, gold has moved from $US255 to $US428 since 1991 so NZD 
investors involved in the US equities have made good gains thus far as they 
have appreciated faster than the NZD has depreciated against the kiwi. NZ 
holders of gold during the same timeframe are basically flat. 
http://quote.yahoo.com/m5?s=XAU&t=NZD&a=1&c=3 The point is that in NZD we 
still have the chance to buy weakness, accumulate, and position for growth.

Common wisdom would suggest 5-10% of vested capital in physical gold (or 
silver) as a hedge against weakness in paper instruments, such as currency, 
bonds, equities, funds and other derivatives. I would not advocate more than 
that for the typical NZ investor.

Here is some reading:

http://www.norfed.org/html/articles/debtfor.asp Billions for the Bankers, 
Debt for the People - The Real Story of the Money-Control Over America. From 
this, move onto learning about Fractional Reserve Banking to understand more 
about the analogy you wrote below.

http://www.321gold.com/fed/greenspan/1966.html Gold and Economic Freedom 
1966 - Alan Greenspan. This watershed paper describes the role of gold as 
the asset backing of money, which it now is not.

In regards to R.Prechters 'Conquer the Crash', 
http://www.elliottwave.com/conquer/ yes I have read it. Prechter has 
captured the essense of a deflationary depression and describes the 
horrifying circumstance that surrounds it, and that we are destined to 
experience it. I cannot say with conviction that I believe Prechter 
entirely, but his material is compelling if one can handle the depressing 
nature of it without becoming psychotic.

All this aside, unlike most other investments, precious metals is a tangible 
fungible asset encased in a historical value equation. The world we live in 
has transitioned in two short generations from tangible assets to debt 
instruments. If you think of Gold as the 'canary in the coal mine', the 
canary has been dying for 22years and suddenly in 1991 it sprang to life 
again. When gold comes to life (ergo prices rise), this is a sign that 
something is not right with the world economies.

The journey of discovery can be long and tortuous (fundamentals of Gold are 
extremely complicated), or it can be simple (the trend is your friend). 
Above all, investing in gold is a response to a circumstance. One must have 
at least an inkling of that circumstance before one would vest capital in 
the 'ancient relic' called Gold. Clue: 'Insurance'.

BAA



>From: "C T" <moneyquestionsconz@hotmail.com>
>To: baa_baa@hotmail.com
>Subject: RE: Question
>Date: Sat, 24 Jan 2004 10:09:27 +0000
>
>Hi there
>
>Though not typically a goldbug myself I have read a book that tells of 
>impending doom regarding world wide financial fudge up. The main theory 
>behind it is that money is a promise to give gold, and if you have a 
>situation where someone lends $100 to someone else, they get a contract 
>that is worth $100, in their mind they have $100, so does the borrower. so 
>we have mr borrower and mr lender sitting here with their respective $100, 
>lets say for hypothetical purposes that mr borrower buys some US equities, 
>now he has an equity contract worth to him $100, and the seller takes the 
>$100 and loans it out to another mr borrower who also buys stocks. but 
>thats not all mr borrower decided now would be a good time to start margin 
>trading so he loans out an addtional $100. ok just so we're on the same 
>wavelength lets take a look at the situation from the origional $100 
>(promise to provide gold) we now have 'assets' worth $500. ok I think i can 
>wrap it by saying that if the market crashed and or a depression occured, 
>well lets say for all intensive purposes that the stock market crashes;
>borrowers stock $200 goes to $0
>other borrowers stock $100 goes to $0
>both borrowers default on their loans and go bankrupt and jump out of 
>buildings
>lenders debenture $100 goes to $0
>sellers debenture goes $100 to $0
>other seller buys gold $100
>so from assets of  $700 we burst and fall back down to the original $100 of 
>gold
>
>and a lot of people say that all  the markets are pumped up too high with 
>debt.
>
>so if it all goes to stuff and all markets crash there may be 
>hyperdeflation and we could see the unrealistic representation of gold 
>(money) bottom out to the original value.
>
>SO if you buy 1% of all the gold thats available at the moment your assets 
>would be like 0.000001% (not sure of actual figure) of all the financial 
>'assets' in the world.
>BUT then the crash happens and we go back to gold standard then you would 
>own 1% of the worlds financial assets.
>
>In conclusion, I don't know the answer to your question but I've almost 
>convinced myself to buy gold now.
>
>I will try and find the author of the book i was attempting to refer 
>to.....
>
>ah yes found it: Robert R. Prechter. Conquer the Crash: You Can Survive and 
>Prosper in a Deflationary Depression
>
>ANyway what do you think of this? have you heard of the book? do you think 
>it is just conspiracy theory or is it the knell of impending doom?
>
>>From: "Baa Baa" <baa_baa@hotmail.com>
>>To: moneyquestionsconz@hotmail.com
>>Subject: Question
>>Date: Sat, 24 Jan 2004 09:36:36 +0000
>>
>>At what price in NZ$ would you consider Gold to be in a bullmarket?
>>
>

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