Dollar creation and fear are about to drive gold substantially higher, Turk says

Section:

2:13p ET Sunday, August 31, 2003

Dear Friend of GATA and Gold:

The newspaper column appended here is of special interest
because it 1) interviews Newmont Mining President Pierre
Lassonde, founder of the late, great Franco-Nevada, who
can never be quoted enough; 2) got published in a major
U.S. Sunday newspaper and thereby sliced through the
usual blackout on gold in the U.S. news media; and 3)
gives a clue about why central banks (and particularly
the U.S. central bank) might be hostile to gold,
something most respectable people in the financial
world fail to grasp or deny when they know better.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Newmont Chief Sees Gold Future

By Al Lewis
Business Editor, Denver Post
Sunday, August 31, 2003
http://www.denverpost.com/Stories/0,1413,361301600280,00.html

Newmont Mining president Pierre Lassonde forks over a
$1 million bill. Visually, it's as impressive as any U.S.
currency. It's even meticulously printed on similar paper.

On the back is a small inscription: "This certificate is
backed and secured only by confidence in the American
Dream."

The line on the novelty note comes off as a joke. But
Nixon uncoupled the dollar from gold in 1971, so maybe
it isn't so funny.

Lassonde smiles. We spoke last week after a weakening
dollar put gold at a six-month high.

Gold appears to be rebounding from a 20-year bear market
that began with a war on inflation in the 1980s and ended
with a war on terrorism and a loose fiscal policy that is now
flooding the world with dollars.

Gold was $35 an ounce in 1970, peaked at $850 in 1980 and
from there to nearly $250 in 1999. It's still bouncing around,
but last week it was on the upswing at $375.

Newmont is rising with the tide, its stock up more than 200
percent since October 2000.

Lassonde, who has 60 percent of his net worth in gold-related
investments, doesn't believe his luck ends here. As the
author of "Gold Book, The Complete Investment Guide to
Precious Metals," he can argue why gold might one day
climb to $6,500 an ounce.

His arguments, though bold, are compelling -- even bearing
in mind that he has every incentive to preach a bullish
theology and that many financial experts believe average
investors should put no more than 5 percent of their portfolio
in gold.

"I call gold the anti-dollar," Lassonde said. "When the dollar
is strong and acts as the reserve currency that it is, there is
no use for gold. But when the dollar is weak because of fiscal
and monetary policy, then the ultimate reserve currency is
gold."

So with a rising U.S. trade deficit and a federal budget
deficit that is financed with a steady flow of foreign cash,
gold is behaving more like a currency than a commodity
in Lassonde's view.

"The United States is sucking up 70 percent of the world's
savings to live in the manner it's accustomed to," Lassonde
said "This can't go on forever."

To be sure, the global politics of the American lifestyle, the
intricacies of central bank policies, currency fluctuations
and geopolitical events are impossible to predict. Also, a
strengthening economy has the potential to turn the tide
against gold.

But if you put these factors aside and consider gold as
just a commodity, Lassonde has some more basic
supply-and-demand arguments, too.

The 20-year bear market in gold has weeded out marginal
gold producers and significantly curbed exploration and
production.

"If gold was $1,000 an ounce, it still takes four to seven
years to open a mine," he said.

Then, on the demand side, there is India and China.

India, home to a billion people, is increasingly affluent,
particularly as U.S. companies add jobs there instead of
here. So Indians are buying more gold.

Then there's China, where after years of communist
controls, the government is deregulating gold, allowing
gold companies to have initial public stock offerings,
creating a gold exchange and even allowing its citizens
to buy gold at market rates.

That's 1.3 billion people who now are permitted to buy
gold at market rates as they participate in their
fast-growing economy.

"China by itself could become 40 percent of the entire
gold market," Lassonde said. "That is the most
important thing that's happened to the gold market in
the last five years, and yet very few people have
picked up on it."

A golden opportunity? Only time will tell, but it's an
interesting thesis. Meanwhile, know that the lure of
gold has made many millionaires and many paupers.

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