The Goldwatcher

Since the last Goldwatcher post:

It’s almost three months since my last Goldwatcher posting the day after Goldman Sachs were humiliated in congress for putting  lipstick on a pig.  On the same day politicians in the US  gloated they had ambushed President Obama’s drive to effectively regulate the US financial services industry.

It’s probably more than a coincidence that yesterday the U.S. Senate passed the biggest overhaul of financial-industry regulation since the Great Depression and Goldman Sachs settled the SEC fraud charge for $550 million. $250 million will  be returned to bilked  investors; $300 million will  be paid to the U.S. Treasury. The settlement does not resolve SEC charges against Goldman vice president Fabrice Tourre, the joint defendant named in the  lawsuit. Getting him off the hook  may yet cost Goldman a few hundred million more.

I was surprised to find near universal criticism of President Obama while in the US recently.  In this blog I have consistently taken the view that the President has been effectively seeking solutions to an unholy financial mess and there is progress now on two key domestic fronts. But there are other open cans of financial and geopolitical worms in the US and elsewhere. Contagion risks flowing  from Greece, Portugal, Spain and other countries  still menace the security of the Euro and the solvency of European banks. Global agreements on financial regulation remain stalled. Issues on sovereign solvency are unresolved.

 Gold’s stateless money franchise:

The last Goldwatcher posting ended with this conclusion as valid now as it was when first posted:

Goldman’s worst day with this issue may have been yesterday. They may yet escape any compensation and, even if settling could cost them  $1 billion or so,  Goldman MD Blankfine indicated yesterday big sums are managable everyday issues for them.

  For most of us that isn’t the case. We need to protect our assets against contagion. Gold’s stateless money franchise ensures potection.

CLICK HERE FOR KITCO GOLD PRICES AND ANALYSIS

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Readers, particluarly those who have not yet read The Goldwatcher,  are reminded that this blog is not an advisory service. Opinions expressed are not intended as investment advice and should not be treated or used as investment advice

CLICK HERE FOR KITCO GOLD PRICES AND ANALYSIS

CLICK HERE FOR REALTIME MULTICURRENCY GOLD PRICES  

 TO BUY THE GOLDWATCHER CLICK HERE:

No Goldman lipstick on the pig?

On 23rd April Goldman Sachs posted a lengthy  rebuttal  to all charges of impropriety alleged by the SEC and others. The last sub paragraph in their  Executive Summary is relevant in relation to the SEC fraud charge with three key points made: 

1:’Goldman Sachs never created mortgage-related products that were designed to fail.’

2  ‘It is critical to remember that the decline in the value of mortgage-related securities occured as a result of the broader collapse of the housing market.’ and

3:  It (the decline in the value of mortgage-related securities) was not because there were any deficiencies in the underlying instruments. The instruments performed as would have been expected in those unexpected circumstances.’

No pig? The housing market collapsed:

Readers of the Goldwatcher will have read on page 147:

1: ‘You had to be blind not to see the bubble in the US Housing market;’ and

2:’Banks were heavily implicated in the development of the housing market bubble and the crash.’  

Can  banks now seriously claim they were  unaware that their Triple A Rated mortgage backed securities were suspect? Were they blind?   Or innocent bystanders?  Or just naive victims of a wholly unexpected housing market collapse that came out of the blue? Banks were anything but naive and can’t make any of these claims. The securities they created on the back of a bubble they helped inflate were pigs. The only question is who put the lipstick on them.

No Lipstick? The securities performed as expected :

Addressing the key contentious issue in the SEC fraud charge Goldman claim they ’never created mortgage-related products that were designed to fail.’  However there is a more general issue. The relationship between banks and the credit rating agencies they paid to rate their mortgage backed securities. Agencies  who share responsibility for the lipstick on the pig.

Commenting on the absurd Triple A Ratings banks secured for dodgy securities Senator Carl Levin has been scathing. He likens the bank - rating agency relationship to one of the litigants in a case paying the Judge. Or one sporting team paying the referee. The relationship may not have been that corrupt. But neither were banks naive. They can’t protest the housing bust came out of the blue, took them by surprise and their securities performed ‘as expected’ in ‘unexpected circumstances.’ 

A can of worms is open. Integridy of key financial institutions and key underpinnings of our credit based economies are suspect. There are no silver bullets to magic the mess away.

Gold Stateless  Money Franchise:

In a recent comment Weakness Begets Weakness the gold fund and money manager Eric Sprott references ‘the subprime mortgages rated AAA now worth pennies on the dollar.’  He tracks  both the Greek Soveriegn and Mortgage Backed Securities debacles and argues:  ’…as they relate to sovereign debt, the ratings provided by the agencies are highly suspect…there appears to be very little forward-looking information actually factored into their credit models. In some cases, the agency ratings end up looking absurdly optimistic.’

Sprott finds the Triple A rating accorded to the US Government out of touch with reality and, after citing recent analysis by the US Government Accounting Office (GAO) he  concludes ‘The ratings agencies can opine all they want, but it seems clear to us that the only true AAA asset to protect your wealth is gold.’ 

On Pages 116 and 117 The Goldwatcher addreses the bottom line as seen by the GAO : ‘Federal Fiscal Policy is unsustainable.’ That was written over two years ago. It was true and menacing then an is even more menacing now.  And it’s why people are seeking the protection afforded by gold’s stateless money franchise now.

Sprott makes a strong case for gold as the enduring Triple A Security that will survive sovereign ratings downgrades.  

# Note added 27th January: 

Yesterday Senator Carl Levin published a confrontational listing of the issues and findings of fact  on which Goldman Executives will be challenged today.  Depending on the legal advice witnesses have they may not all testify.  Levin’s summary reads:

The bipartisan Subcommittee investigation has resulted in the following findings of fact regarding the role of investment banks in the financial crisis:

Opinions and advice:

Readers, particluarly those who have not yet read The Goldwatcher,  are reminded that this blog is not an advisory service. Opinions expressed are not intended as investment advice and should not be treated or used as investment advice

CLICK HERE FOR KITCO GOLD PRICES AND ANALYSIS

CLICK HERE FOR REALTIME MULTICURRENCY GOLD PRICES  

An open can of worms: 

Readers of The Goldwatcher will not be surprised by recent news affecting Goldman Sachs. Their questionable practice of short selling securities of the same class as they sold to clients and others was highlighted on page 138 and identified as a reason to own gold as insurance against financial market risks. The book went to press two years ago.

When the  US Securities and Exchange Commission (SEC) announced a civil fraud charge against Goldman Sachs on Friday the price of their shares fell about 13%  - wiping over $11 billion  off the company’s market capital. Though Goldman dispute the charge it is an enormous embarrasment to them, to the investment banking establishment, the financial services industry and the national regulators who have been either asleep at the wheel or missing in action. The SEC case is complex and the story has still to run its course. It’s early days in relation to  consequences.

In a nutshell the SEC’s complaint alleges that Goldman stiched their customers up by selling them a synthetic security based on a vulnerable portfolio of securities selected by a hedge fund manager who intended to profit from shorting the same securities via Goldman. The investors ended up losing about $1 billion. The hedge fund manager ended up making about $1 billion.  The SEC fraud complaint arises from the alleged non disclosure by Goldman to their client  buyers  relevant information on the hedge fund’s role in selecting securities likely to fall and the short position bet made by the hedge fund.

It’s a can of worms if ever there was one.  The kind of treachery that, if ever proven or even widely suspected, will undermine  Goldman’s franchise as international bankers. It’s easy to see why their share price took a hit. But why did gold also fall?

Gold prices and Goldman’s relationship with John Paulson:

We would expect that when Wall Street gets caught out putting lipstick on a pig,  as they often do, the gold price will go up. But in this instance gold went down and it’s still falling. To an extent this is because the hedge fund manager involved in the deal with Goldman was the high profile billionaire gold bull and gold fund manager John Paulson.

The SEC have made it clear they are not alleging any fraud by Paulson. But investors who lost money on the securities may launch their own claims and, for various reasons,  Paulson may reduce his vast holdings of gold via Exchange Traded Funds and trigger a fall in gold prices. There is  no evidence that this will be the case. But nervous investors or specualtors may expect he will and reduce their exposure in anticipation.

Neither The Goldwatcher book or this blog are aimed at fine tuning gold price prospects. The case for owning gold as insurance against financial market risks was compelling when the book was published two years ago.  It still is. 

# The words ‘ a synthetic security based on’ in line 2 of Para 3 have been added for clarity after publication.

Opinions and advice:

Readers, particluarly those who have not yet read The Goldwatcher,  are reminded that this blog is not an advisory service. Opinions expressed are not intended as investment advice and should not be treated or used as investment advice

CLICK HERE FOR KITCO GOLD PRICES AND ANALYSIS

CLICK HERE FOR REALTIME MULTICURRENCY GOLD PRICES  

Eric Sprott and the IMF:

Well known for the fierce case he makes against reckless central bank money printing Eric Sprott is one of the world’s most successful gold fund managers and investors.

When Sprott offered to buy gold directly from the IMF recently he encountered a rebuff. Commentators touted the rebuff as proof of something sinister in the declared gold holdings of the IMF or its members. A direct enquiry to the IMF yesterday made by an unemotional journalist has cleared the air.  Here is his report:  

‘We spoke with Alistair Thomson of the IMF and he clearly explained his reasonings behind not being able to sell Mr. Sprott gold.  Among them:

• The IFM only goes through a specific broker.
• It only sells gold to sovereigns.
• Thus, Sprott’s desire to purchase IMF gold did not comply with ‘protocol’. 

The sting appears be out of charges suggesting the IMF was engaged in a cover up.  But Sprott’s warnings on the money printing outcomes are alarming.  Two of his recent articles  ‘Is It All a Ponzi Scheme’ and ‘Dead Government Walking’ pull  no punches. Many readers will find the conclusions unthinkable.

Unintended revelations at a CFTC Hearing:

Commentators in the gold community suggested market manipulation again at a March 25th meeting of the US Commodities and Futures Trading Comission concerning precious metals. Surprisingly the most telling revelation at the meeting  came from an ambiguous comment by Jeffrey Christian, one of the world’s foremost authorities on markets for precious metals.

In a nutshell, in response to a question on multiple gold trades based on London Bullion Market Association (LBMA) physical stocks,  he declared: ‘People say, and you heard it today, there is not that much physical metal out there, and there isn’t. But in the “physical market,” as the market uses that term, there is much more metal than that. There is a hundred times what there is.’ This is a link to a video of the testimony and this article gives a useful account of the CFTC meeting, Jeffrey Christian’s revelation and its implications. 

You should be on your guard if you own gold via an Exchange Traded Fund or other custodial or paper structure.  Imagine the consequences if anything goes wrong when you have been holding gold as a physical store of value to protect against risks associated with paper assets and you find you have an asset that’s 99% paper and 1% real.  Like the worthless  fraudulent securitized debt securities that tipped the world economy into the mire a few years ago -  but with your Government now broke and unable to bale you out!  

Is gold poised to spike?

Chart courtesy Kitco www.kitco.com 

While The Goldwatcher book was never intended as a source for gold price prediction, assessing a reasonable price for gold,  based on supply and demand fundamentals,  is key to the analytical framework outlined in Chapters 1 to 9, this blog and the following recent postings: 

September 8th 2009: $1000 Gold - Here to stay or here to play? 

November 5th 2009 : Are Goldrush Prices Making Sense?

December 18th 2009 : Gold : Motivation & Strategy (Investors Chronicle Article)

January 4th 2010:  Gold: Afghanistan and Obama’s multi trillion $ ‘naughties’ legacy

January 12th 2010 : Gold Prices, a Weak $ and a Strong China

The above chart reflects the gold price settling down over the months since the ‘Are Goldrush Prices Making Sense’ blog was posted.  Technical analysts are now pointing to signs of a breakout  - well supported by increased gold holdings in Exchange Traded Funds and with central bank support.

There may be an innocent explanation for Mr. Christian’s remark: ’But in the “physical market,” as the market uses that term….there is a hundred times what there is.’ But I have not seen him, the LBMA, the World Gold Council or any responsible custodian in the gold industry come forward with the explanation. 

A gold price spike won’t come as a surprise to me unless I have seen a satisfactory explanation on what he meant. And, if and when an explanation comes, keep these two points in mind. First  the case for holding gold as insurance against the unthinkable is compelling. Second Eric Sprott’s track record as a forecaster is formidable. It would be dumb to dismiss his warnings as a sprott of bother. 

Opinions and advice:

Readers, particluarly those who have not yet read The Goldwatcher,  are reminded that this blog is not an advisory service. Opinions expressed are not intended as investment advice and should not be treated or used as investment advice

Opinions and advice:

I would like to remind readers, particluarly those who have not yet read The Goldwatcher,  this blog is not an advisory service. Opinions expressed are not intended as investment advice and should not be treated or used as investment advice.

President Obama’s multi $1,000,000,000,000 debt horizons:

Just seeing the array of noughts in a trillion dollar sum should be enough for most of us to recognise we haven’t the training to relate to such a gigantic number.

But, to accomodate borrowing requirement to the end of 2010,  President Obama’s administration  sought permission  from Congress last month to raise the U.S. national debt ceiling by about $1,800,000,000,000. 

To prevent the United States  from defaulting on committments Congress agreed an urgent interim  increase  of $290 billion and thereby raised the debt ceiling to about $12,400,000,000,000. This will only cover borrowing requirements to the the end of February  Further debate will follow in Congress this month along with debate on funding requirements for  extended troop committments in  Afghanistan. Congress may raise the roof this time round before they raise the ceiling again. 

The Afghanistan debacle:

Afghanistan prospects keep getting worse.  Now,  not only has President Obama made further extensive troop committments to the war but,  following the attempted Christmas day mass murder in the Amsterdam to Detroit flight and associated security myopia,  it’s obvious  the case for fighting terrorists in Afghanistan instead of in the US is unsupportable. The terrorist menace knows no boundaries. Security systems are still flawed.

In a New York Times op-ed jihad.com published ten days before Christmas,  the columnist Thomas Friedman explains the ’Virtual Afghanistan’ threat. ‘Let’s not fool ourselves,’ he writes ‘Whatever threat the real Afghanistan poses to U.S. national security, the “Virtual Afghanistan” now poses just as big a threat. The Virtual Afghanistan is the network of hundreds of jihadist Web sites that inspire, train, educate and recruit young Muslims to engage in jihad against America and the West. Whatever surge we do in the real Afghanistan has no chance of being a self-sustaining success, unless there is a parallel surge — by Arab and Muslim political and religious leaders — against those who promote violent jihadism on the ground in Muslim lands and online in the Virtual Afghanistan.’ Keep in mind also the economic jihad  - ‘topple the economy and you topple the Crusaders.’

Gold, Afghanistan, debts and deficits.

Gold prospects will be reviewed in the light of events as they unfold. In previous postings I have commented that, in my opinion,  prices in the range $1000 to $1100 make sense.  Am still reading and reviewing commentary from sources referenced in The  Goldwatcher and other credible commentators on recent developments. When I have worked  my way through the material,  will file a posting updating analysis and previous comments. 

CLICK HERE FOR KITCO GOLD PRICES AND ANALYSIS

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$2000 dollar gold?

The conclusion that gold in the range of $1000 to  $1100 makes sense is well supported by: 

 1: Renewed central bank interest evidenced by The Central Bank of India’s  $6.7 billion purchase of 200 tons of gold from the IMF at $1045 per ounce  announced two days ago ; and

2: Background analysis in The Goldwatcher on when gold prices make sense and when they don’t . 

Pundits are now beating the goldrush drum with talk of prices on course to $2000, $3000 and even $5000. At present, in my opinion, these predictions don’t make sense.  Conditions will change as will expectations for gold and other currency prices.  But, while the world still faces deflation,  further dramatic price rises can’t be expected  without a catalyst for change,    

The recovering world economy:

I advanced the case in The Goldwatcher for drawing a line between the pre 9/11 and post 9/11 worlds. Now we have to draw another line between the world as it was in September 2008 when the global economy was about to plunge into the depths, as illustrated in the above Time cover,  and the world as it is now with clear signs of  recovery in some important economies.  However,  though generally showing signs of growth,  many economies are still in emergency care and won’t survive without financial life support.  In this delicate state investors need continuous advice on currencies and I don’t give investment advice. Further investors in different parts of the world will also need advice specific to their needs.   Here are some accessible information sources I rely on:

1: Kitco for live reports with charts on gold prices and analysis differentiating the extent to which price movements are attributable to $ movements and investor activity;

 2: Dr Marc Faber’s Gloom Doom and Boom report with astute comment from the perspective of a gold expert and icon contrarian investor; 

3: Sharefin’s extraordinary chart resource and regular news postings;

4:  Link deleted 10th August 2010

 5: The Bullion Buzz for well selected contributions supporting the case for gold;

6: IHS Global Insight’s Economic Outlook -  a superb resource that takes the pulse of the most important factor in the global economic equation - the US economy. Working outside the investing bank community Global Insight are free of hype.  As independent economists they are consistently rated among the world’s most prescient forecasters across the spectrum of key economies and industries;

7: Nouriel Roubini’s RGE Monitor . The gold standard macro economic commentary for those who can afford the price;

8:  Kitco Casey : the immaginative and sound resource for speculative investors focusing on the big picture and rewarding opportunities; and

9: The Goldwatcher Webliography  listing of publications contributing essential regular information and analysis.(Page 322) 

Goldwatcher commentary:

I will comment on catalysts for change and key developments affecting gold from time to time. To be kept advised on future postings to this blog,  or other contributions I make,  e-mail me:  johnnkatz@gmail.com

Note added 16th December : There appears to be a glitch with the forwarding of e-mails addressed to me at The Goldwatcher. Any message not acknowledged has not been received. I apologise for this and will respond to any messages not acknowledged if they are re-sent to me at the above address. Thank you for reading The Goldwatcher and good luck with your investments.

* Added 9th November 2009 : Video interview with Jon Nadler, Kitco, on bear market in the $ rather than bull market in gold>

* Added 11th November : Street.com interview with Jon Nadler, Kitco 

CLICK HERE FOR KITCO PRICES AND ANALYSIS

CLICK HERE FOR REALTIME MULTICURRENCY GOLD PRICES  

TO BUY THE GOLDWATCHER CLICK HERE:

CLICK HERE FOR REALTIME MULTICURRENCY GOLD PRICES  

TO BUY THE GOLDWATCHER CLICK HERE:

Motivation, Timing & Strategy:

Gold has again breached the ‘magical $1000 threshold.’ Some see this as a sign of yet higher prices to come. Others see it as another overshoot. What should investors do?

The importance of motivation, timing and strategy is emphasised in The Goldwatcher. If the motivation for holding gold is to hedge against financial, currency and security upsets current strong prices reflect the value of the holding as part of a risk protection strategy.  It’s another story if the motivation is speculative. 

The $1000 Threshold:

This comment is from a January 2009 Goldwatcher posting reviewing annual price forecasts by leading analysts:   

‘The 25 industry analysts contributing to the 2009 London Bullion Market Association survey are upbeat - but not euphoric.  Last year the most bullish among them forecast that gold would pass $1000 - which it did for  few days in March. This year, 75% of forecasters expect gold to hit record highs again, with a predicted average high of $1073.54 and overall average of $862. However, as in 2008, prices are also expected to  reach an average low of $721.46.

For gold to rise significantly there must be a catalyst.  In the previous posting on ‘Gold, Red Ink and Animal Spirits’  price is discussed in some detail.  The posting includes analysis from Goldman Sachs on price prospects and analysis on gold and deflation. This is the key comment on gold and deflation :

‘Characteristic of most deflationary periods are deteriorating credit quality and  the shift by investors from capital growth to capital preservation.  Deflations typically end after crisis conditions force policymakers to enact large-scale inflationary policies designed to counteract deflationary conditions.’

Without a catalyst high gold prices are likely to reflect a price  overshoot - overshoots and undershoots are both par for the course in currency and commodity markets.

The $

It will be a whole new ballpark for gold if central banks are buying instead of selling . A comment in The Telegraph ‘ yesterday ‘China, Bernanke and The Price of Gold’  by the astute commentator Ambrose Evans- Pritchard reviews evidence of China switching some $ reserves to gold and the prospect of Sovereign Wealth Funds holding more gold - a subject addressed in The Goldwatcher.

A recent study Is The World Losing Faith in the Dollar? published by Wharton University  opens with the comment : ’ As the global economy appears headed toward recovery, concerns are growing that the United States’ addiction to massive fiscal stimulus as an economic panacea could eventually lead to an even bigger crisis — a loss of confidence in the U.S. dollar.’

Pakistan & Afghanistan:

The following chart illustrates ‘Pashtunistan’ - the porous Afghanistan Pakistan border regions populated by  Pashtuns from Afghanistan and Pakistan :

Other factors  driving high gold prices are the Iraq and Afghanistan debacles and the realisation of an economic Jihad being waged against the West. The June 21st 2009 Gold Watcher posting Economic Jihad : How vulnerable is the $? discussed this development. 

A June 2007  Goldwatcher posting ‘Between Iraq and Another Hard Place’ addressed menacing developments foreshadowed in The Goldwatcher Chapter on ‘The Economic Consequences of 9/11 and George W. Bush.’

A soaring gold price will be sustainable only with  grass roots supply and demand support and investors must take into account that at current prices bedrock demand for phyical gold for jewellery from India has slumped.   The Goldwatcher provides a framework for fundamental analysis but does not address the technical analysis speculaltors take into account. 

The Gold Price and Fair Value 

Current prices certainly confirm the value of gold as an asset with a risk reward profile different to other financial assets. Loking beyond considerations based on fair value  Goldman Sachs analysts noted in a recent report   ’…‘just like crude oil in mid-2008, if enough people worry about the dollar and inflation, momentum can carry gold to much higher levels beyond any measure of fair value.’ 

It will be surprising if the gold price doesn’t settle down above fair value when people factor in the Afghanistan debacle and its potential effects on Pakistan, an economic basket case and a failed nuclear state.

+ Note added 9th December 2009 : New York Times Article on The War in Pashtunistan

‘Topple the economy and you topple the Crusaders:’

The above graphic ’Fire of Jihad’ appears on the  cover of the online magazine ‘Al Yaqeen.‘  The symbols in the graph of the burning World Trade Center Towers  reflect the sharp decline in post 9/11 US economy.

The section in Chapter One of the Goldwatcher ‘Insight into the Post 9/11 World and the Jihad against America’ ends with the comment ’as investors we have to draw the line between the pre 9/11 world when the US was at peace and the post 9/11 world with the US at war…’

A recent article ‘War by Other Means : Econo Jihad’ addresses the sinister economic side of the conflict. The article by Professor Gabriel Weimann published by Yale Global  reveals how Al Qaeda has been tuning strategy to do maximum damage to the western economy. Even as far back as 2002,  Weimann writes,  ‘Al Qaeda claimed its strategy was to reduce America to economic ruin.’

Jihadi Internet chatter now suggests ‘both exultation about the economic crisis gripping the west and a call for what can be labeled an “Econo-Jihad,” targeting Western financial systems and economic infrastructure. The mantra is ‘Topple the economy and you topple the Crusaders.”

Insuring against the consequences of Econo Jihad:

An insurance salesman should have no difficulty convincing us we need protection against risks flowing from the econo-jihad.  And that’s where gold comes in. The section ‘Crisis and Financial Market Risk Insurance’ in Chapter One explains why,  for protection against ‘the unthinkable’,  we have to own and posess gold.  Stateless money that keeps its value even in the worst of times. 

I expect the Western economy will have the strength to resist this metastisis of terrorism and also think President Obama will prove to be a formidable protector of the interests of the U.S.  and her allies. But so what? 

When it comes to protecting our security  it doesn’t matter what you or I think.  What matters are the serious consequences that will follow if  unthinkable scenarios play out and why gold is essential insurance against real risks to our financial security. These  include risks to the stability of all fiat currencies including the dollar.

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CNBC’S interview with Frank Holmes, Goldwatcher co-author yesterday: 

Following dramatic rises in the gold price yesterday - and even more dramatic falls  in equity and commodity markets world wide -  CNBC interviewed Goldwatcher co-author Frank Holmes,  one of the world’s most authoritative and respected voices on gold.  

The CNBC interview covers key issues investors must keep in mind and is supported by comments from CNBC analysts. Frank Holmes’s headline advice is straightforward  ’Don’t buy gold to get rich - buy gold for protection.’

 You can  Access the CNBC interview through this link.

The Goldwatcher and this blog contributed by co-author John Katz:

My content in the Goldwatcher is unbiased. I am an independent analyst and neither a gold bull or bear. In a nutshell my contributions point to when owning gold makes sense and when it doesn’t and when gold prices make sense and when they don’t. The Chapters I contribute address the questions investors interested in gold must ask,  starting with their motivation, timing and strategy for making and managing their investments.  

The most recent update on gold price prospects in this blog was posted on 22nd January

The Goldwatcher book and the blog address the issues of the day affecting demand for gold,  other currencies and other assets. They include subjects ranging from  the wars in Iraq and Afghanistan to our once rock solid British Banks now going bust.

The Goldwatcher Book Chapters follow this sequence

 Foreward by Dr. Marc Faber - starting with this comment:

‘Years from now, the events of late 2007 and early 2008 will be remembered as a classic case of the flawed thinking by Governments that choose to use monetary policy to try and sustain an unsustainable economic bubble, and how that action broadens and deepens the pain when the bubble inevitably busts.’

Part 1 : Written byJohn Katz  ‘The Goldwatcher’ in this blog -  e-mail address : john@thegoldwatcher.com

1:  Introduction : Why Gold?

2: The Gold Mining Industry : What price gives producers a worthwhile profit?

3: Gold Supply and Demand : Do Central Banks still need gold, and does gold still need Central Banks?

4: The Rise and Fall of the Gold Standard : Did Gold Cause the Great Depression?

5: The Dollar Standard and the ‘Deficit without Tears’ : Is the dollar again America’s currency and everyone else’s problem?

6: The Economic Consequences of 9/11 and George W. Bush : For how long will Asians go on lending for Americans to go on spending?

7: The End of Cheap Oil, Chindia and other Tipping Points to Instability 

 Will alternative energy come to the rescue?

(The causes and evolution  of the present economic crisis including the housing boom and bust, the CDO racket, Alan Greenspan’s misguided views on regulation  etc are all covered in the above Chapter)

8: Globalisation and Global Economic Rebalancing

Can the IMF avoid global financial meltdown?

9: Gold Prices : Inflation,Deflation, Booms and Busts

Do trees grow to heaven?

10: Investing Choices . What Gold?

Part Two : Written by Frank Holmes:

11: Inside US Global Investors

12: Investing in Gold Equities

13: Gold Mining Opportunities and Threats.

PART THREE : THE FACT BOOK APPENDIX - includes detailed analysis of global gold mining production, fabrication, scrap recovery and central bank holdings, sales and intended sales;  a Chart Book, Chronology and Webliography.

The Goldwatcher is available from Amazon and all leading booksellers

 Troops massing on India Pakistan border:

The Ever Present Chaos of Being:

… every single event is the offspring not of one, but of all other events prior or contemporaneous, and will in its turn combine with all others to give birth to new: it is an ever-living, ever-working Chaos of Being, wherein shape after shape bodies itself forth from innumerable elements…Thomas Carlyle . 1795 to 1881 .  Essay on History

Carlyle’s often quoted essay addresses the ever present potential for chaos.But do any of us, other than Zimbabwians and others in similar unfortunate circumstances,  remember economic and geo-political times as near the threshold of chaos as we are now?  Yet we see almost everyday headlines on chaos in currency markets, insolvent banks and shadow banking establishments,  burst property and other financial bubbles,  fraudulent securities bankrupting organisations, soaring unemployment ravaging commuinities ,  unsustainable debt leverage,  the collapse of major industries, fragile energy stability,  reversion to pre cold war conflicts, nuclear proliferation and even a resurgance of piracy. 

A Bloomberg comment noted yesterday that typically  ’gold staged a strong rally (rising to $870)  following Palestinian militants launching their biggest rocket attack on southern Israel in at least six months after a truce expired Dec. 19,  at the same time as  Pakistani troops were being diverted from tribal areas near Afghanistan to the border with India.’

Roosevelt and Obama: 

With the Great Depression ravaging  the US and other economies President Franklin D Roosevelt faced a dire economic picture when he took office on 3rd March 1933 . In his inaugural address he spoke of dark realities- with ’the withered leaved of enterprise everywhere,’ industrial production slumping, banks failing, unemployed citizens facing the grim prospect of existence. ‘Only a foolish optimist,’ he declared ‘would ‘ deny the dark realities of the moment.’

Pages 62-66 of The Goldwatcher address Roosevelt’s key  2003/4 messages. These pages are, in my opinion, essential reading for everyone - except, of course, ‘foolish optimists!’ But it is debatable whether Roosevelt’s memorable assurance ‘we have nothing to fear but fear itself” is as true now as it was in 1933.

 The Goldwatcher’s Year end message:

The Goldwatcher shares the high hopes held for US President elect Obama’s success and anticipated the  formidable challenges he faces. They include global banking and shadow banking establishments in crisis, unprecedented debt leverage,  nuclear proliferation in unstable countries, failed military enterprises and unfunded social insurance obligations way beyond anything that menaced Roosevelt when he took office. 

GOOD LUCK FOR 2009 AND BEYOND - AND PLEASE RE-READ THE GOLDWATCHER PAGES 8 & 9

Gold is the UNIVERSAL aid to ‘having nothing to fear but fear itself’.' The one and only stateless money franchise that assures protection against chaos in currency and financial markets, social disorder and a range of the other financial and security risks we are exposed to.