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DRDGOLD Ltd. Message Board

  • baystock2 baystock2 Apr 29, 2004 2:34 AM Flag

    Pierre Lassonde's remarks

    about today's gold market ... Newmont's conference call. Briefly, here are the points he made:
    Newmont said at the beginning of the year that gold would trade in a band between $380 and $450 this year. They are sticking with that forecast.

    Ten days ago, the specs were long about 450 tons. Since then about 350 tons of those longs have been liquidated.

    Recent renewal of the Washington Agreement should be taken as a sign of faith by central banks in the desirability of gold as a reserve asset. This is an added positive to the obvious point that restricting their sales in itself helps to support the price.

    Gold Fields recent annual report reveals an intent to reduce hedges by 300 to 400 tons this year. With gold now approaching $380/oz., any company attempting to reduce hedges should be very interested in buying right now. China copper inventory has backed up. Also there has been stockpiling of other industrial metals by people speculating on a rise in the renmimbi. The reason? Nobody wants to get caught with a lot of dollars on hand if and when a realignment occurs. Because of this, the Chinese Premier's comments about slowing the economy, last night, triggered a panic out of many of these positions. But the Chinese aren't interested in SLOWING the economy. They are just interested in slowing the RATE OF GROWTH. Even if they succeed, they will continue to place an enormous strain on world wide commodity supplies. Expect worldwide reflation to continue as a major investment theme. Interest rates will not rise much because debt levels are too high to allow that without significant strains on the world economy. Anyway, nominal interest rates always rise along with inflation, and since when is that supposed to be bad for gold? Dollar is in a bear market rally. This will not last because it worsens America's current account deficit. As soon as that begins to show up in the statistics, the dollar will go into another swoon.

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    • [Interest rates will not rise much because debt levels are too high to allow that without significant strains on the world economy.]

      If debt levels rise, rates rise with them or lenders refuse to lend. He must add that in order to avoid such stress monetary authority must come in to provide money to keep rates from rising. We haven't gotten to that point and we're nowhere near. Also, it is exactly that that monetary authority must not do to prevent feeding the inflation monster.

      [Dollar is in a bear market rally. This will not last because it worsens America's current account deficit.]

      He's got the cart before the horse. The expanding US economy is what drives down the dollar because foreigners are the low cost producers. We send dollars over there and they must be recycled here. The US is less efficient, call it, inflates, at a faster rate than the foreigners, so the repatriated value increment of the dollar is lost and the nominal currency dollar must reflect this loss of intrinsic value. So the dollar declines.

      [As soon as that begins to show up in the statistics, the dollar will go into another swoon.]

      It moves long before that because the dollar operates in a free market. The free market sniffs out the right price long before results of price changes can be tallied.

    • the following two remarks by Lassonde got inadvertantly left out from my previous post:

      Expect worldwide reflation to continue as a major investment theme. Interest rates will not rise much because debt levels are too high to allow that without significant strains on the world economy. Anyway, nominal interest rates always rise along with inflation, and since when is that supposed to be bad for gold?

      Dollar is in a bear market rally. This will not last because it worsens America's current account deficit. As soon as that begins to show up in the statistics, the dollar will go into another swoon.

 
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