GOLD OR PAPER STANDARD? by Henk J
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E U R O P E A N G O L D C E N T R E information on gold, the only store of value, and international gold mining and exploration companies G O L D V I E W STRATEGIC INVESTMENT IN GOLD FOR INSTITUTIONAL INVESTOR, FUND MANAGERS, CENTRAL BANKS, ANALYSTS & GOLD PRODUCERS www.terrapinn.com/2010/gold May 2010 ▬ GOLD ▬ I N T H I S I S S U E $800 OR $5,000? 1. Editorial Comment GOLD OR PAPER STANDARD? by Henk J. Krasenberg 3. BAILING OUT COUNTRIES, AFTER THE BANKS, CAR COMPANIES ETC., BY HUGE SUMS OF MONEY MAWSON RESOURCES LTD. WOULD FEEL A LOT BETTER WITH GOLD IN THE VAULTS 4. D I S C O V E R I E S Last month, I elaborated on how frustrating it can be A1 Minerals Limited for many people when it comes to gold. This month, the M I N I N G E V E N T S comments on gold reflected the controversial nature of the 5. yellow metal and in more in particular, what it does to C O M P A N Y N E W S people. On one side, we can notice that the 'man in the street' 7. is becoming increasingly aware of the attraction of gold. The R E P O R T I N G media widely signal that gold is selling at high levels and the The Fear Premium of Gold launch of the ATM which makes it possible to buy real gold by Dian L. Chu with a credit card or plain cash was covered in many 8. magazines and TV broadcasts. It was actually a re-launch of F E A T U R E D the machine, now in a gold plated version and now in Dubai, where gold is still a Gold: desirable asset. Already some months ago, I told you about the introduction of this Needed Now More Than Ever German invention and showed a picture of it in the GOLD NUGGETS section. by James Turk 9. On the other side, the recent comments of (some of) the insiders continued to G O L D N U G G E T S amaze me. Not surprise me, because the same old doom talk on the gold price comes into the limelight every time the price of gold goes up significantly and even more every time gold takes a downturn. Especially then, because that are the moments of glory for those who say that gold is overpriced and predict that gold will not only go down but even collapse when 'the bubble' will burst. Some time ago it was Barclays that allowed one of its analysts to predict that gold would go down to US$800 as demand for gold would drop considerably. Before that it was a Credit Suisse analyst that ventilated similar sounds. And every day again, you can find the bears on several gold sites on the net that tell us why they think that gold is living in luxury time but not for long anymore. It is amazing to me that this happens with gold whereas the opposite happens when it comes to the stock markets. There, every time the markets take a plunge -the last week we have seen it again-, several specialists come out of the wings to tell us that the markets only have a temporary setback but that recoveries are just around the corner. In my many years of being in and around the markets, I have never come to understand this difference in approaches. Is it may be that the stock markets are like football (soccer) in the ► ______________________________________________________________________________________________________________________________ The information presented in this report is obtained from sources believed to be reliable but is not guaranteed either as to accuracy or completeness. The European Gold Centre does not render investment advice and the contents of this report is not to be considered, and under no circumstances to be construed as, a recommendation or solicitation to purchase of commodities and/or securities of the companies described or mentioned herein. E U R O P E A N G O L D C E N T R E ______________________________________________________________________________________________________________________________ EDITORIAL COMMENT ► sense that (nearly) everyone knows about it and has an outspoken opinion on it and that only a very few know about and understand gold and the gold markets? Fortunately, every now and then we can read about the other and in my opinion the better side of the golden coin. Like a few days ago, when the Wall Street Journal had an interesting article about a smart investor who puts his money where his mouth goes, saying 'I feel the only asset I have confidence in is gold' . They were not talking about George Soros, Warren Buffett, John Paulson or the like but about someone that most probably not too many people have heard of. The article was about Thomas Kaplan, a New York-born, 47 years old billionaire and commodities magnate who with his Tigris Financial Group built an empire devoted largely to gold and other precious metals, to bullion, mining companies and mining properties with holdings reaching a value of close to US$2 billion. But there is a lot more in the article about him that I found remarkable because it touches one of the primary reasons that I see to substantiate my positive opinion on the outlook for gold, i.e. the demand factor. Mr. Kaplan has a Doctorate in philosophy from Oxford University and his Doctoral Thesis was titled "In the Front Line of the Cold War': Britain Malaya and South-East Asian Security 1948-1955. From studying Britain's involvement after World War II in Malaya, home to prized rubber and tin, he learned how supply and demand can drive the price of raw materials and how far people and governments will go to secure natural resources. On demand and supply, Mr. Kaplan says: 'Gold miners are struggling to make major discoveries and it takes years to bring new finds into production. If people want to stock up on gold in a hurry, it will be hard to ramp up production enough to satisfy them'. Turn to page 10 of this issue where I have put one of his statements on gold and you know where he stands. It is so refreshing to hear an undisputedly intelligent person like Mr. Kaplan say these things on gold! With what he says, he also clearly underwrites what I have been saying so many times over the last few months. The demand and supply ratio for gold that most pessimistic gold commentators interpret as negative, is built on the past. But what we have to include in our observations is the potential demand and supply ratio as it can be in the future. This plus the fact that gold still is selling at half of the inflation adjusted all-time high of US$850 per ounce of January 1980, makes gold attractive and still cheap ! The world of gold is not dead or dying as many want us to believe, the world of gold is alive and kicking and will be for the next few years . Another controversy is more related to the function that gold used to have and still should have in the world of finance and economics. Last month, I mentioned Paul Nathan who is a believer in the good-old gold standard. This historical function has more or less disappeared, or rather, it has become less and less significant. In the past, at a time that the always recurring subject of gold and the central banks was actual, mainly in fear of their continuous selling, I made the statement that I wished they would sell all the gold they had. At least then, we would know and admit that we are living in a paper society. Quite often, I remember what I said then. Like lately, following the discussions about Europe trying to cope with the financial difficulties of some of the European nations by injecting huge sums of money into hurt economies where only a strict tightening of the belts would have a chance to reverse the spending trends. Looking back at how the USA bailed out their banks and car companies and also Europe saved their banks by injecting large sums of capital without really asking to abide by new and stricter rules and regulations, makes me wonder about the eventual result of all these bail-outs. Quite often, I realize that all these financial impulses are not given out of monies that we have but out of monies that we create. It would make me feel a lot better if this financial wizardry would be done with a lot more gold in the vaults of the central banks. A perfect example of wishful thinking……or……? Furthermore in this issue of GOLDVIEW: Another introduction of a SUPPORTING COMPANY although you undoubtedly recognize the name of Mawson Resources Ltd. as the company that I introduced last December in the first issue of MINING IN EUROPE . Then it was focussing only on uranium in Sweden and Finland but now it has diversified into a significant gold project in PERU , reason to include the company in the GOLDVIEW ranks of SUPPORTING COMPANIES too. In the section DISCOVERIES , I pay attention to the Australian company A1 Minerals Limited , which has just recently joined the ranks of Australian gold producers. In the COMPANY NEWS section, you find worthwhile news from the SUPPORTING COMPANIES and news from some GUEST companies in the section HIGHLIGHTED NEWS .