If Down Is Up and Bad Is Good, Gold Stocks Must Be Hot


4:45p EDT Wednesday, August 16, 2000

Dear Friend of GATA and Gold:

You might enjoy the mention given today in Thom
Calandra's column at CBSMarketWatch to GATA Chairman
Bill Murphy's web site, www.LeMetropolecafe.com, and
to the case for gold.

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

* * *


Flight to quality leads to a fight

By Thom Calandra
August 16, 2000

LONDON (FTMW) -- All around us are signs of the
flight to quality, or the fight for quality -- even
if some people don't read market signs that way.

Ten-year government bond yields in most civilized
countries are lower today than they were on May 1.
The U.S. government's 10-year bond (TNX: news, msgs)
has seen its yield fall to 5.8 percent from 6.5
percent in May. Bond investors, a cynical lot,
probably figure their money is better off in the
safety of fixed income than in the stock market.

Richard Li, the young chief executive of Pacific
Century CyberWorks, likely will leave his
billionaire father's empire when he resigns from
Hutchison Whampoa in Hong Kong. The son of Li Ka
Shing is about to complete the merger of Hong Kong
Telecom into his once-unknown Internet company.
Whether the younger Li's move is a flight to quality
or from quality remains to be seen. Daddy's
Hutchison Telecom is the largest mobile operator in
Hong Kong, and Hong Kong Telecom (HKT: news, msgs)
is a close second

Oil futures are selling for prices that far exceed
what most analysts were expecting a couple of months
ago. The price of a barrel of oil is now at $31.50,
giving a sustained lift to oil companies such as BP
Amoco (BP: news, msgs), drillers and the country of
Venezuela, whose President Hugo Chavez sees no
reason to depress the price of the commodity.
(Rising oil prices are already lifting consumer
prices for petroleum and other bare necessities.)
See related story.

Shipping rates, reports FT.com, are surging. The
price that a freighter charges to ship goods is
often factored into the price that consumers pay for
those goods. The higher costs are coming in the wake
of expanding world trade, rising oil prices and a
shrinking fleet of seaworthy vessels. (Higher
shipping costs could accelerate the pace of

Office vacancy rates across Canada's major cities -
Toronto, Vancouver, Ottawa - are at their lowest in
a decade, says CB Richard Ellis Global Research.
During the past six months, other cities that have
lagged the booming global economy, like Barcelona,
Madrid, some Latin American metro areas and
Melbourne, Australia, have seen rental rates rise as
much as 10 percent. (Rising office rental rates ...
well, you get the picture by now.)

The German auction for next-generation mobile phone
licenses has thus far reaped 42 billion euros, or
about $39 billion, more than the U.K. stashed in its
last free-for-all. All the biggies are bidding, but
at least one telecom company, Swisscom's (SCM: news,
msgs) German cellular unit Debitel (DE: 540800:
news, msgs), has exited the auction. Other telecom
companies smaller than the Deutsche Telekoms of the
world now say they will only bid for lower-capacity
licenses. See story. (The sky-high license prices
could boost the cost of owning a mobile phone in
coming years.)

December gold futures in New York hit their highest
point, $280.50 an ounce, since, well, Aug. 2. Not
too exciting, unless you see pent-up gold demand,
accelerating inflation, excessive short-selling of
futures contracts and other good stuff sparking a
runaway gold price later this year. Dave Walker, one
of many folks who subscribe to Le Metropole Caf, a
Web site and discussion group that caters to gold
bugs, says "Like oil, gold will eventually see an
explosive breakout where the market controllers
loose their grip, and the threat of central bank
sales and producer hedging are ignored. It is
looking more and more as though oil will be the
trigger for gold." Too much gold, say the gold bugs,
is being consumed at too cheap of a price.

Like I said, flight to quality or from quality?
We'll see.