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John Hathaway: Gold can triple without any catastrophe

Section: Daily Dispatches

8:14a ET Wednesday, November 1, 2006

Dear Friend of GATA and Gold:

Tocqueville Gold Fund manager John Hathaway surveys the gold and financial markets in his new essay, "Trivial Pursuit," and remarks:

"Should fear revisit the financial markets, buying power for gold is without precedent. While the gold mining industry struggles to produce 2,500 tonnes per year, an amount that would increase the above-ground stock of gold by a paltry 1.7 percent, the financial system continually spews out a blizzard of new financial assets, all of which represent potential claims for liquidity and safety.

"In the bleak days of 1935, the market cap of above-ground gold equaled 15 percent of U.S. financial assets. In 1980, when bonds were dubbed 'certificates of confiscation' and good-quality equities traded at six times earnings and 6 percent dividend yields, that same percentage was 29 percent. In today's carefree world, that percentage is only 3 percent. The price of gold can double or triple in the absence of catastrophic outcomes simply as more investors attempt to position the exchange-traded fund."

That is, the ratio between gold and all other financial assets is more extreme than ever, and as Wits Gold Chairman Adam Fleming said at GATA's Gold Rush 21 conference last year, even a small move by investors can take the central banks out of their gold.

You can find Hathaway's essay at Gold-Eagle here:

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

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