Gold continues to do
As time passes that 400 ceiling is making every effort
to become a floor. While this year seems to drag on this inevitable
slow consolidation period is necessary before gold continues its
longer term trend climbing higher. And further evidence of gold’s
unending battle to conquer 400 as a floor for the gold price…
“If gold is able to conquer 403 I expect
a quick move to 405.00 with potential to climb to 411.00…”
Scotia Mocatta, 8-17-2004
How about that! Gold continues to show more strength
with each passing day! And look at the headline below.
“Nevertheless, barring sudden strength by
the U.S. dollar, bullion prices are likely to remain solidly underpinned
by support at US$400/oz, US$398 and US$395, traders and analysts
said.” Nicholas Sinclair, Dow Jones Newswires, 8-19-2004
The world is definitely turning to gold. What is that
old saying? Every dog has his day? Well, as time passes gold will
have many, many more very favorable days. Too many growing financial
problems & there must be one stable currency for the world to
trust. The world is a dangerous place & is becoming more so
every day. And if the world has you frightened & worried the
following story may even frighten you more.
“JENNA CAUGHT IT. JENNA CAUGHT THE FISH!”
“Bush shouted to journalists from his father’s
boat.” Scott Lindlaw, Associated Press, 8-7-2004
Our world is becoming a more treacherous place. But
in the middle of all these crises I feel comforted & at peace
to know that “…JENNA CAUGHT THE FISH…”
“Rods & reels in hand, the family set
out together in the morning on the Fidelity III, the new powerboat.
Three 275-horsepower engines rumbled beneath the boat, which can
reach speeds of up to 75 mph.” Scott Lindlaw, Associated Press,
Yes, good to know that while our sons & daughters
are dying in Iraq that Bush is making every effort to make certain
that there will be a continued need for all that Iraqi oil as he
powers up that new speedboat with not 1, not 2, but 3 - 275 horsepower
And I know the fishing & boating industry is happy
as they watch Jenna catch her fish & observe Daddy riding off
into the sunset in his gas guzzling power boat.
“Earlier Saturday, several family members
climbed onto the family speed boat for a fishing expedition. One
of President Bush’s twin daughters reeled in a 38-inch striped
bass, the president announced.” Scott Lindlaw, Associated
And don’t you dare give me any grief for bashing
Bush since you let me get away with bashing Kerry last week. I think
all of us should take every opportunity to whack our leaders &
leader wannabees. It keeps them (hopefully) humble.
But let’s talk about China & gold.
I know the subject of China & Asia is probably
beginning to bore you. Very repetitive message it seems. The same
ole’ story over & over again & retold by every writer
under the sun. But do you think the sailor should ever tire of looking
at the light house?
Focusing often on China & Asia may bore you to
tears but what is unfolding in that part of the world will probably
grow to have a very considerable impact on both your life &
your children’s lives for the next several generations.
And when we discover something influencing profoundly
our children’s future welfare & prosperity then its best
to listen again & again & again…& then again if
“TENSIONS RISE AS ECONOMIC POWER TILTS”
James Cox, USA Today, 8-11-2004
“China spends its dollars on U.S. Treasury
securities, and, by doing so, helps keep interest rates down for
American borrowers.” “That’s good, right? Not
necessarily, says Jeffrey Garten, dean of the Yale School of Management.
“IT’S A SWORD OF DAMOCLES OVER THE UNITED STATES. We
never want to be in a position where any foreign government has
so much influence over our interest rates,” he says.”
James Cox, USA Today, 8-11-2004
Now here is an interesting point. Most folks in this
country are apathetic to China’s growing potential strangle
hold on the U.S. & do you ever wonder why?
“The USA is the world’s largest economy,
with annual output of $11 trillion. China, No. 2 at $6.5.trillion,
is the fastest-growing economy, barreling ahead at average annual
growth rates of 9% a year. IN 2002, CHINA SURPASSED THE USA AS THE
WORLDS LEADING DESTINATION FOR FOREIGN INVESTMENT.” James
Cox, USA Today, 8-11-2004
The U.S. doesn’t seem too concerned about Chinas
growing economic might. Maybe the U.S. of A feels that if the competition
just gets too tough we’ll just go over there with a few troops
& guns & bring the country under submission.
“Yet China isn’t emerging so much
as re-emerging. The Chinese economy outperformed Western Europe’s
for more that 1,000 years, until the 16th century.” James
Cox, USA Today, 8-11-2004
Yes, while our ancestors in Europe were living in
squalor during the Dark Ages China was a technological marvel whose
people were living with an extremely high standard of living. And
when Marco Polo returned to Europe to tell of the fantastic sights
& innovations he had seen there every European thought he was
a liar & nuts.
China today is RE-EMERGING as a super power.
“By 2020, China will have a middle class
of 200 million, vs. 186 million for the USA, says Ming-Jer Chen,
a business strategy expert at the University of Virginias Darden
Graduate School of Business Administration. At that point, he predicts,
Americas service-based economy will find it is COMPETING ON NEW
FRONTS WITH THE CHINESE – battling for dominance in banking,
insurance, telecommunications & other service industries.”
James Cox, USA Today, 8-11-2004
“American manufacturing workers earned an
average $16.14 an hour in 2001. Their Chinese counterpoints earned
61 cents a hour…” “If anything, Yale’s Garten
says, CHINAS IMPACT ON THE U.S. ECONOMY IS ONLY GOING TO GROW. The
two countries will struggle to make room for one another, he says.”
James Cox, USA Today, 8-11-2004
Let’s read that last text again.
“THE TWO COUNTRIES WILL STRUGGLE TO MAKE
ROOM FOR ONE ANOTHER…”
This kind of reminds me of the story of ancient Carthage
& Rome. One super power lived in the West & the other super
power maintained its empire in the East. And for a long while the
two great powers traded with one another & made money off of
one another. But as time passed the two growing & expanding
powers began to compete for the same limited resources & profits.
And that is the situation we are going to find between
China & the U.S. Our resources (including oil) are quickly being
used up & the time is not long before the competition intensifies
greatly & it becomes more difficult to share.
“We’ve never been exposed to an onslaught
of this magnitude,” he says. “And what were seeing now
are just the initial convulsions.” James Cox, USA Today, 8-11-2004
And what does this have to do with gold?
Well, for one the Chinese understand & appreciate
the value of gold even more than we do here in the west. In just
the past several years the Chinese have been making every effort
to build up their gold mining industry & they have been seeking
western technology & western dollars to accomplish this goal.
The text below illustrates China’s official
policy to do everything in their power to build & strengthen
their gold & silver mining industry.
“China welcomes foreign investment in its
gold production, according to an official with the State Economic
and Trade Commission (SETC).” - click
And listen to the following very important fact below.
“CHINA'S INDUSTRIAL AND PUBLIC DEMAND
FOR GOLD FAR EXCEEDS THE COUNTRY'S OWN PRODUCTION.”
And further evidence of China’s commitment to
expand the minerals & natural resources industry.
“According to the Ministry of Finance,
the Chinese government intends to take pro-active measures to guide
non-governmental capital into the commercial exploration of mineral
resources…” “China will strengthen international
cooperation and attract more foreign capital to devote to sustainable
development, especially with regard to projects relating to the
surveying and exploration of mineral resources that are abundant
in the country.” - click
Getting back to readers comments the following email
“Yes, UNBELIEVABLE that Delta could be on
“NOW, PICTURE THE U.S. ECONOMY AS A DELTA.”
“The real story about a Delta is that it's
just a harbinger of what awaits our economy without real change,
timely change. AND THE HARD MONEY ISSUE IS JUST AN EFFECT FROM THESE
CAUSALITIES, which if the "mainstream" were listening,
would dissect & learn from quickly, instead of seeing precious
metals as an "enemy"…!”
“Wow, what kind of world will it be without
And the following I ran across a couple of days ago & I just
could not pass it up.
“In the new GQ, the Democratic presidential nominee offers
relationship advice for men:”
”ON WHAT TO SEEK IN A WOMAN:”
"Look for what gets your heart. Someone who excites you turns
you on. ... It's a woman who loves being a woman. Who wears her
womanhood. Who knows how to flirt and have fun. Smart. Confident.
... And obviously sexy and saucy and challenging." Drudge Report,
And John, don’t forget to add that it also helps if that woman
is worth a cool billion dollars. But getting back to the title of
this article, “Why China Will Drive Gold Higher.”
I guess the main point to understand is that China
is opening up the gold market to its people - all 1.5 billion. And
to the Asian mentality gold is not a “worthless
relic.” Gold is, instead, a very integral & major
component to their economic well being & financial stability.
CHINA WILL DRIVE GOLD HIGHER BECAUSE THE CHINESE
WANT TO OWN GOLD & THE CHINESE DEMAND FOR GOLD WILL NOT BE MET
FROM CHINESE YEARLY GOLD PRODUCTION.
And talking about the Chinese makes me think of rice
& other starches.
Had some great fresh out of the garden lima beans
yesterday at my favorite diner in downtown Greenville. Good fresh
cooked beans are kind of like a good steak. If they are fresh enough
(just out of the garden) & cooked just right all you need to
add is a little butter & salt & pepper. It’s nice
to occasionally go to a fancy restaurant, but the best eating day
to day are beans, fresh hot out of the oven cornbread dripping with
melting butter on top & home made fresh tea with a lemon slice.
Appropriate & nutritional eating habits are something
else we could learn from the Chinese. They eat sensibly & you
don’t see many fat Asians. Smart folks really.
Probably the strongest piece of writing that has come
out recently supporting a strong powerful gold demand by the Chinese
is an article in Mineweb.com. Now at first glance this article appears
to question the Chinese demand for gold. But under further analysis
the article really supports a very positive & strong Chinese
demand for gold.
And remember, Mineweb editors do not wish to be considered
journalists, but they are analysts. And when an analyst writes for
public dissemination their goal is to make their readers think &
to use their brains.
Witness the following quote.
“…if the PBC (Chinese) wanted to increase
its gold reserves to a significant level, the gold market is not
physically large enough to allow that without a major reaction.”
Peter Gonnella, Mineweb.com, 7-10-2004
Now everybody & their brother & every idiot
in town knows that the Chinese are rapidly becoming over populated
with American greenbacks. Everyone also knows that China will eventually
have to begin selling some of these vast US dollars they hold in
their reserve & replace these dollars with gold. And again,
what does the article text above say will happen when the Chinese
begin selling dollars to be replaced with gold?
“…A MAJOR REACTION…”
Yes, & a “…MAJOR REACTION…”
with the gold price shooting for the stars!
But let’s get back momentarily to lunch. Went
back to the diner next day – fresh picked big butter beans
on the menu! Good eatin’! If everybody in this country would
just eat a big bowl of butter beans every day we wouldn’t
need all that Arab oil.
Sat down at the counter next to an old & distinguished
Albert Davis was his name. He kind of reminded me
of Morgan Freeman. And Albert has been coming to Gene’s Diner
for over 45 years. Remembers back in the early 60s when Gene’s
was the only diner in town that served black folks – at the
back door only. Thank God times do change & sometimes very much
for the better.
And let’s delve further into the real facts
about Chinese gold demand.
“…trading in gold is expected to become
a crucial investment arena for Chinese individuals.” Xinhua,
Now pay attention to the fact here that these news
quotes are coming from Chinese news sources. And who would know
better than the Chinese themselves about their desire for gold?
“A recent questionnaire by the Beijing Gold
Economic Development Research center in 10 major cities in China
showed 70% of respondents said that they would invest in the gold
trade if they had money & over 20% of securities investors would
transfer part of their capital to gold trade.” Xinhua, ChinaDaily.com,
And listen to the following Chinese estimations for
“Experts predicted that nearly 7.5
million (Chinese) investors will try the gold trade while continuing
the securities trade in the future. Calculating that each one will
invest 10,000 yuan (about US $1,200) of capital, the trade will
attract 75 billion yuan (some US $9 billion) of funds in total.”
Xinhua, ChinaDaily.com, 12-5-2003
NOW CAN YOU ANSWER THE QUESTION & UNDERSTAND
WHY CHINA WILL EVENTUALLY DRIVE THE GOLD PRICE DRASTICALLY HIGHER?
You can bet your bottom fanny gold is heading to the
moon eventually & contributing to gold’s climb will be
the gold lovin’ Chinese!
Let’s listen to Bill Bonner talk about China.
And as always Bill is very much worth listening to.
“Let's see...the Chinese get new factories,
jobs, wages, profits, technology, assets, savings, capital, know-how.
We Americans LOSE jobs, assets, savings, capital, factories, profits
and so forth.”
“THE FOREIGNERS (INCLUDING THE CHINESE)
OWN MORE AND MORE OF WHAT USED TO BE AMERICAN WEALTH-PRODUCING ASSETS.”
Bill Bonner, Daily Reckoning, 8-18-2004
Now to really put in perspective how China is growing
in wealth & how wealth in the U.S. is declining absorb the following.
“When Ronald Reagan arrived at the White
House, foreign-owned U.S. assets were less than 15% of GDP. NOW,
THEY'RE OVER 78%. And they're growing rapidly. Net purchases of
U.S. assets by foreigners rose to $71.8 billion in June, up from
$65.2 billion in May. Most of that was in U.S. Treasury bonds. And
most of those were purchased by Japan and China.”
Bill Bonner, Daily Reckoning, 8-18-2004
If these facts do not help you to understand &
to interpret growing “trends” then I do not know what
“This puts the U.S. economy - and even its
elections - largely in foreign hands. IF THE CHINESE OR JAPANESE
SHOULD DECIDE TO SELL TREASURYS, FOR EXAMPLE, IT WOULD CERTAINLY
BOOST INTEREST RATES, pop the housing bubble and likely cost George
W. Bush the White House.” Bill Bonner, Daily Reckoning, 8-18-2004
And just how historically important are these trends?
“… Asian growth is being driven by
industrialization and related development in China and India as
dramatic as the transformation of the United States in the 19th
century from a small colonial economy of 4 million people to the
world's largest economic power." Bill Bonner, Daily Reckoning,
Hopefully, after exploring these facts all of us can
see a future correlation to gold & China. And if we have any
common sense we will have to ask ourselves why we may not yet be
invested in this gold market.
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August 20, 2004
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