GOLD

[Aussie]

To all; the coming next few weeks should be very telling. The action witnessed last week in my opinion was the market beginning its dicounting process of the future hyperinflation to come. Because of the size and scope of current "malinvestments" globally, we could watch "paper values" literally disintegrate over a very short time frame. For those that have not done the math, when a currency implodes and approaches zero a cup of coffee approaches infinity in that destroyed currency.

The way I see Bonds, the Dollar, and Gold both fundamentally and technically is that paper is gasping its last breath by trying to stay ahead of the financial tsunami while Gold has spent 9-10 months in a coiling phase. If the system holds together, I can envision the famed $1,650 number coming into play on this run. If the system fails, you might as well pick a number. If the Dollar is headed to oblivion and a cup of coffee is approaching infinity then what kind of number do you suppose an ounce of Gold will sport?

Last summer everyone was "short the Dollar", I believe that the short speculators have been blown away and now we will witness the most gigantic and over owned long in history go to the slaughter house. This Dollar long position took years and years to create and the Fed is doing it's damnedest to continue "spreading the wealth" [ha ha]. Now we will get to see what happens to a market when there is only ONE BUYER. In the Treasury market this one buyer is none other than The Federal Reserve. The Fed will have the job of buying gobs and gobs of Treasuries, the only problem will be that the Fed must actually "print" [digitally create] the Dollars for these purchases. This monetization will occur at the same time that the rest of the world is also selling Treasuries. We will witness humongous new supply along with secondary supply as the world regurgitates their current "safe haven" holdings. But what to do with your "safe capital" once you have exited Treasuries? Jump to another frying pan made of paper?

I see no other mathematical possibility other than a mass inflow of capital into Gold as petrified capital scurries for cover. The current setup for the greatest transfer of wealth in all of history could not be more obvious now, yet before every major market move in history the obvious was ignored. I guess it was ignored until it became "too" obvious. For those who are looking, WE ARE THERE!

The current market capitalization of the global mining industry cannot be much more than $250 billion, this is chump change when you consider how much has already been spent and how much more has been pledged by governments across the globe. The fact that this industry is so small will create massive dislocations in price when large players want to enter the arena. I can envision $20 stocks moving a point or more on less than 1,000 shares changing hands. I say this because the weak hands have already been washed of their shares, all that remains are the strong hands and firm minds. The moves witnessed in early '06 by the mining shares will pale in comparison to the phase I believe we are now entering.

If it weren't for the social and economic chaos that I believe is right around the corner, I would suggest that owning metals and the miners will be more fun than imaginable. It will probably turn out to be a matter of survival!

Regards, Bill H.