The ''Greenspan put'' is the end of moral hazard in the markets

The New Gold Accord

By Michael Kosares
Centennial Precious Metals, Denver
a href=http://www.USAGold.comhttp://www.USAGold.com/a
Monday, March 8, 2004

I see the renewal of the European central banks' gold sales
agreement as a positive for the gold market. Here's why.

When you look a the supply demand tables, the one thing that
stands out clearly is that mine production is static in the
2,200-2,600-tonne range and has been for almost a decade.
Given the statements of industry stalwarts, it doesn't appear
that the production is going to improve any time soon.
Exploration budgets were cut to the bone during the quiet
years, and it takes upwards of seven years to bring a known
deposit to production. Scrap is another constant in the
600-tonnes-per-year range.

Meanwhile gold usage is on a steady growth curve from
3,400 tonnes in 1994 to 4,000 tonnes per year now. That
gap between mine-plus-scrap production and usage must be
filled. But how?

In years past most of that gap has been made up through
mining company forward sales programs, central bank sales,
and net disinvestment. Now forward sales programs have
gone to the other side of the ledger with the advent of
dehedging.

For example, in 1997 hedgers were responsible for bringing
an extra 470 tonnes quot;supplyquot; to the table. In 2002 they
bought back 420 tonnes and showed up on the quot;demandquot;
side of the ledger. That's a 890-tonne turnaround!

I disagree with the analysts who are saying that producer
buy-backs will slow down or even disappear. This doesn't
square with the hefty hedge books some of these mining
companies will be burdened with as the price rises.

If anything, I see even more de-hedging in the offing -- and
the tonnages, I believe, will come as a surprise.

Today's announcement is important from another perspective.

Let's keep in mind that all this started many years with a plea
from N.M. Rothschild for more quot;transparencyquot; in the gold
business. The representative of Rothschild might well have
used the word quot;predicablilityquot; because that's what they were
after. We now know that 500 tonnes will be coming on the
market annually over the next five years and from the lease
pool emanating from these central banks and NO MORE.
Central bank gold sales will remain the same as they were
five years ago for the next five years.

With investment demand -- the big X factor heating up globally
in the face of a dollar problem -- appearing increasing
intractable, this cap on the supply side of the chart will figure
mightily in the thinking of both long-term hedgers as well as
speculators in the hedge funds and big bank trading
departments. One London trader was quoted a few days ago
as saying that he wasn't concerned about the rise in sales
from 400 tonnes per year to 500 because the market needed
the supply.

I concur. In fact, I believe the market could have withstood
700-800 tonnes per year without a blink in the current
environment, and there is a possibility that the market will
come up woefully short under these circumstances -- a
prospect likely to be reflected in the price.

Watch out for a delayed positive reaction or a protracted
upturn in the gold price as a direct result from today's
announcement.

The losing position will continue to be on the short side of this
market and I think the players know it. The next phase of this
secular bull market will display a strong and incessant
undercurrent of physical demand with some nations seeking
to bolster their official-sector holdings and some of the smaller
central banks pressuring the bullion banks to have their gold
deposits returned.

----------------------------------------------------

To subscribe to GATA's dispatches, send an e-mail to:

gata-subscribe@yahoogroups.com

To unsubscribe, send an e-mail to:

gata-unsubscribe@yahoogroups.com

----------------------------------------------------

RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS

Free sites:

a href=http://www.jsmineset.comhttp://www.jsmineset.com/a

a href=http://www.cbs.marketwatch.comhttp://www.cbs.marketwatch.com/a

a href=http://www.mineweb.com/http://www.mineweb.com//a

a href=http://www.gold-eagle.com/http://www.gold-eagle.com//a

a href=http://www.kitco.com/http://www.kitco.com//a

a href=http://www.usagold.com/http://www.usagold.com//a

a href=http://www.GoldSeek.com/http://www.GoldSeek.com//a

a href=http://www.capitalupdates.com/http://www.capitalupdates.com//a

a href=http://www.goldenbar.com/http://www.goldenbar.com//a

a href=http://www.silver-investor.comhttp://www.silver-investor.com/a

a href=http://www.thebulliondesk.com/http://www.thebulliondesk.com//a

a href=http://www.sharelynx.nethttp://www.sharelynx.net/a

a href=http://www.mininglife.com/http://www.mininglife.com//a

a href=http://www.financialsense.comhttp://www.financialsense.com/a

a href=http://www.goldensextant.comhttp://www.goldensextant.com/a

a href=http://www.goldismoney.info/index.htmlhttp://www.goldismoney.info/index....

a href=http://www.howestreet.comhttp://www.howestreet.com/a

a href=http://www.depression2.tvhttp://www.depression2.tv/a

a href=http://www.moneyfiles.org/http://www.moneyfiles.org//a

a href=http://www.howestreet.comhttp://www.howestreet.com/a

a href=http://www.minersmanual.com/minernews.htmlhttp://www.minersmanual.com/mi...

a href=http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.htmlhttp://ww...

a href=http://www.goldcolony.comhttp://www.goldcolony.com/a

a href=http://www.mineralstox.comhttp://www.mineralstox.com/a

Subscription site:

a href=http://www.lemetropolecafe.com/http://www.lemetropolecafe.com//a

a href=http://www.hsletter.comhttp://www.hsletter.com/a

Eagle Ranch discussion site:

a href=http://os2eagle.net/checksum.htmhttp://os2eagle.net/checksum.htm/a

Ted Butler silver commentary archive:
a href=http://www.investmentrarities.comhttp://www.investmentrarities.com/a

----------------------------------------------------

COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS

Centennial Precious Metals
3033 East 1st Ave.
Suite 403
Denver, Colorado 80206
www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net

Investment Rarities Inc.
7850 Metro Parkwa
Minneapolis, Minnesota 55425
a href=http://www.gloomdoom.comhttp://www.gloomdoom.com/a
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com

Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
a href=http://www.kitco.comhttp://www.kitco.com/a

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
a href=http://www.milesfranklin.comhttp://www.milesfranklin.com/a
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
a href=http://www.swissamerica.comhttp://www.swissamerica.com/a
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
figoldstein@buycoin.com

----------------------------------------------------

HOW TO HELP GATA

If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA

By credit card (MasterCard, Visa, and
Discover) over the Internet:

a href=http://www.gata.org/creditcard.htmlhttp://www.gata.org/creditcard.html/a

By GoldMoney:

a href=http://www.GoldMoney.comhttp://www.GoldMoney.com/a
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled quot;GATA.quot;

GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.