Milhouse on prospects for hedged and unhedged

Section:

8:40p EDT Sunday, October 10, 1999

Dear Friend of GATA and Gold:

Here's an interesting article from Friday's Australian
Financial Review, forecasting gold's success in a
number of hypothetical world financial scenarios.

Please post this as seems useful.

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

* * *

GOLD SHINES THROUGH GLOBAL GLOOM

By Tony Boyd
Global Markets Editor
Australian Financial Review
www.afr.com.au

Friday, October 8, 1999

Gold looks like a winner under a number of different
scenarios for the world economy, including the
bursting of the financial bubble in the United
States, according to Dr. Marc Faber, markets guru
and author of the Gloom, Boom, and Doom Report.

Dr. Faber says that under the "global healing" scenario
favoured by Morgan Stanley's chief economist, Mr.
Stephen Roach, commodities and inflation would rise
"significantly."

"In such a case I think that gold will go up very
strongly," he says. "But I don't believe in this
Goldilocks golden healing scenario. Instead I rather
think we are going to get the global bust."

However, Dr. Faber says that under the global bust
scenario, which would be triggered by a Wall Street
crash, gold would do well.

"If there is a bust, the Americans will do what they
have done when there has been a problem in the past and
that is let the dollar depreciate by printing money,"
he says.

"So if they do that I think gold will really start to
go through the roof because people will start to lose
confidence in money."

Dr. Faber says there is another scenario under which
gold would continue to rise and that involved a further
slide in the U.S. dollar.

"Let's assume that the U.S. dollar becomes very weak,"
he says. "The Europeans would not want to have a very
strong euro. They could accept a 10-20 per cent
appreciation in the euro but they would not want any
more simply because the European economies are
basically still weak."

He says pressure by Europe on the Americans to raise
rates would probably fail, which would force the
Europeans to cut rates, leaving investors looking for
alternative currencies.

"If you look at all the currencies in the world, I
think it's very difficult to make a really good
fundamental case for any of them," he says.

"The U.S. dollar is relatively strong but sick because
of the growing trade and current account deficit. The
euro is not a particularly desirable currency and the
Japanese yen is not attractive because of the financial
problems Japan has.

"So at the end of the day there is only one currency
that is attractive, and that's gold."

He says the sudden run-up in the gold price from short
covering was a classic outcome of a "crowded trade." He
says the world's two big remaining "crowded trades"
were big market cap stocks on Wall Street and the
interest rate swap market.