Here is the list we published last week showing the five highest spot future Gold closing prices for 2003 so far:
Here is that list brought up to the close on September 5:
Spot future Gold has closed every day of this (shortened) first week of September in the confined $US 6.80 space between its May closing high and its February closing high. As you can see, at its close of $US 377.70 on Friday, September 5 (up $US 4.70 on the day), spot future Gold is now only $US 1.30 below its February 4, 2003 high.
For the financial powers that be, especially the ones in the US, this is getting scary. It is at least as scary as it was back in November/early December 2002, when Gold began the leap which took it from the low $US 320s to its February 4 high of $US 379. If you want to measure how scary it was, remember Mr Bernanke's blockbuster speech about preventing "deflation" on November 21, 2002? To refresh your memory as to what happened after that, take a look at the Gold commentary we wrote on December 20, 2002.
Back then, Fed officials were out en masse to ensure everyone who would listen that everything was under control. Now, they are at it again. This week, no less than SIX Fed officials, including Bernanke, Parry, and McTeer of the "gold put", were out assuring everyone that there was no need for the Fed to raise rates because inflation was so "low". Last weekend at Jackson Hole, Wyoming, Mr Greenspan was telling everyone that he cannot be constrained by anything like rules or laws or even "indicators". He must be free to use his own judgement and "risk manage" the situation as it unfolds.
As we state in our Gold commentary of December 6 last year (see the link above) Gold rode a "wall of worry" all the way up to its February 2003 highs. Those highs, in early February 2003, exactly coincided with Secretary of State Colin Powell's appearance before the UN to make the case for war in Iraq. Mr Powell didn't make the case, but he did send the message that the war was inevitable and imminent. Gold duly slumped.
That slump lasted until the beginning of May, when President Bush made his now infamous "carrier landing" to declare that "hostilities are over". Of course, they were just getting started. Almost with the words leaving Mr Bush's mouth, Gold began a rally which carried it all the way back to within $US 6.80 of its February highs by May 21.
Again, the deflationary bogeyman was hauled out into the open by the Fed. Again, just as they had in December 2002, the Fed decided to show how "serious" they were. The Dollar was falling again, just as it had been falling in December 2002 - January 2003. They lowered interest rates in late June 2003. Again, Gold fell away, but not as far as it had in the post February correction.
In the Gold rally which took place in December 2002 - January 2003, Gold stocks did NOT participate. In the Gold rally which has been going on since mid July 2003, Gold stocks HAVE participated. They have done more than participate, they have LED Gold's recovery. As The Privateer reported at the time, the Australian (and US) Gold stock indexes CONFIRMED a second upleg on their own Bull market on August 11. Gold has not quite emulated that yet, almost two months later. The BIG point, as has been made repeatedly in recent weeks, is that Gold stocks ALWAYS lead Gold, especially in new uplegs in bull markets.
Like all powerful nations before it, the US government has used war as the ultimate distraction for deteriorating domestic conditions. Roosevelt did it. Truman did it. Kennedy and Johnson did it. Reagan did it. Bush I did it. Clinton did it. And Bush II has done it. After World War II, the US empire could be said to be "inadvertent" and welcomed, existing as it largely did to stave off a REAL and PRESENT danger to the West in the form of the USSR. But since the final collapse of the USSR in 1991, what the US government has done is out and out empire building. Now, they have stumbled badly, have been seen to have stumbled, and are frantically trying to deflect, debunk, postpone, and/or deny the consequences of their actions.
The problem faced by the Bush Administration is that it will be VERY hard to sell a "new" war when they are already bogged down in two - the other one is in Afghanistan. The problem is that the ability of the powers that be to gloss over the consequences of their actions is just about stretched to the breaking point. In fact, if the request for a UN resolution is any guide, it is already stretched PAST the breaking point.
The evidence of this is all around us. The only thing that gives some Americans an excuse to not look at it is the continuing "strength" of US stock markets. But every time another crack in the facade appears, like the ludicrous claim that August US unemployment "fell" to 6.1% while job losses ROSE by 97,000, an almost tangible shudder goes through the whole structure.
Why are we getting such spectacles as the World Bank "predicting" sub $US 300 Gold next year and various refugees from the dot-com boom predicting prices much lower than that? Why does Commercial short interest on the Comex continue to set records - with no effect? For the same reason that a large US institution abruptly switched what was reported to be $US 1 Billion plus from the stock market to the bond market on Friday, September 5. The "powers that be" are losing control of the situation. Historically, this is always accompanied by ever more desperate measures having ever more limited effects.
For decades, Central Bankers and economists alike thought that there was no risk in a managed economy and financial system. Then, they thought they could negate the risks - remember "portfolio insurance" in 1987? Then they thought they could control them with derivatives. Once they saw that none of this worked, the claws were unsheathed and the teeth bared. Now, Mr Greenspan wants no impediments of any sort on his "risk management" expertise while his henchmen assure us in chorus that everything is under control. Methinks they doth protest too much.
There is no doubt that they will go on protesting, but with ever diminishing effect. The problem is that the powers that be did the "managing" and everyone else took the risks. Slowly but surely, more and more of the "everyone else" are perceiving the risks and deciding that they are too big to be taken. As one of the primary pieces of evidence, we give you Gold and Gold stocks. One is on the verge, the other is well on the way. They are both going UP, and whatever short-term hurdles remain to be strewn in their path, they will continue to do so.