The Cheuvreux Report's Impact on Gold
Silver Stock Report
by Jason Hommel, Feb 7, 2006
I'm beginning to think that there are several kinds of money creation inflation that we need to pay close attention to:
First, there is the inflation that started with banking in general, and accelerated in 1913 with the creation of the Federal Reserve. This is the inflation we see in total accumulated M3, the measure of money in the banks, which exceeds $10 trillion now, which, if you divide by the gold held by the U.S., shows that the gold price can exceed $38,000/oz.
For more on that, see my article:
Future Gold & Silver Prices --December 21 email.
Second, there is the inflation that increased in the mid 1990's with an acceleration of the increase of M3 from a plateau of about $5 trillion, which also started with the rigging of the gold price through central bank selling. This inflation should take the gold price towards $2000/oz., as mentioned in the recent Cheuvreux report that endorses GATA's work. (see below).
Third, there is the more recent inflation in M3, which is now increasing at a rate of about 20% annually, which should help propel the gold price up another 10-20% within months. In this category of shorter term events driving gold prices up such as, such as terrorism, mid-east tension & the Hurricanes leading to rising oil prices, a declining dollar against other currencies, etc.
Fourth, the trade deficit (whereby we send U.S. dollars to China that they are using on developing their infrastructure) is causing the immediate rise in price of many commodity prices, such as in copper, zinc, lead, steel, molybdenum, uranium, oil, and such.
So, what will be the impact of GATA's work and the Cheuvreux report? When it first came out last week, I was ecstatic! This is what GATA has worked so hard for: to get the world to recognize the gold leasing scam of the last ten years, that the central banks have about half the gold that they claim to have. This means that when the 1500 tonnes of central bank selling ends, in a gold market with a mine supply of 2500 tonnes and a demand of 4000 to 5000 tonnes, the gold price will take off. GATA has also long maintained, for the last 7 years, that when the investment community recognizes this (through others acknowledging what has happened as in the Cheuvreux report), then the gold price will really move!
But suddenly, I'm more pensive. The Cheuvreux report, endorsing GATA's evidence of central bank selling, is just about as bullish as the Silver User's Association report that endorses the silver shortage feared if a mere 130 million oz. of silver were bought up by the Silver ETF.
Since then, silver has risen 27% in the last three months from about $7.75/oz. to a peak of $9.91/oz.
So, perhaps gold will rise about 30% in the next three months, from about $550 to about $700 due to the Cheuvreux report???
Yes, the central bank selling, once revealed, and once it comes to an end, is bullish for gold. Yes, the silver shortage is extremely bullish for silver. But perhaps the entire world will wake up to the reality of precious metals (and head to $36,000/oz. for gold) slower than I would have thought? Perhaps it will be the continuing rise in commodity prices that will wake up more people and have a bigger impact on rising gold prices (than things like the Cheuvreux report)?
After all, the whole world will not read some report by some big brokerage house, but the whole world sees world commodity prices soaring!
I don't know which will have more of an impact on investor's decisions to buy gold and silver. I do know that if less than 1% of the world's paper money moves into gold and silver, that gold prices will likely exceed $2000/oz., and silver will likely exceed $100/oz. But that still is not happening.
Central banks may still sell some gold. Silver investors who inherit silver and know nothing about it may still dump it to the coin dealers to "get their money's worth" out of the silver. Or, maybe more of the public is now dumping silver to take advantage of the recent nominal price gains?
Yes, at any time, it appears if only one billionaire bought a billion dollars worth of silver, that silver prices could be driven to $25/oz. perhaps by tomorrow?
Regardless, gold, silver, and commodity prices are all screaming upwards in price, and will continue to do so. And anyone looking for a significant dip in price does not know the full story.
So, with that introduction, here's The 56 page Cheuvreux report, followed by many links showing that this is a huge news item, showing part of the story on why gold will soon head to $2000/oz.
Cheuvreux Metals & Mining Report: January 2006
Remonetisation of gold: Start hoarding
GATA's press release:
Credit Agricole's Brokerage Says: GATA is Right, Start Hoarding Gold
Thursday February 2, 8:30
Gold spike predicted to follow Central Bank Lending
Gold Bugs Eye $600, $850 and Far Beyond
By Nick Godt, 2/6/2006
Credit Agricole's Brokerage Declares "Start Hoarding" Gold!
By Jon A. Nones, 02 Feb 2006
Gold: About Central Banks, And Liquidity
February 06 2006 - Australasian Investment Review – (AIR)
Broker Cheuvreux Ponders $2,000/oz Gold
By: Dorothy Kosich '05-FEB-06
Gold Prices May Rally From 25-Year High on Iran, Survey Says
Feb. 6 (Bloomberg)
Here's a quote from the Bloomberg article:
"Even a small transfer of money into gold from other assets would be enough to boost prices, analysts said. One percent of the value of U.S. equities and bond markets is equivalent to $350 billion, or 19,800 tons of gold, Credit Agricole SA analyst Paul Mylchreest said in a report on Jan. 31."
That quote is shockingly similar to one I've made in many of my reports. The implications are huge. 1% of world finance (worth 19,800 tons of gold) is about 4 times current annual gold demand, and nearly 8 times world annual gold production.
Thus, the gold price must go upwards tremendously, and anyone telling you any different is selling you something.
I'm selling something too! I've got gold and silver stock tips that you can use to take advantage of the mistakes of those who print too much paper money, and to take advantage of the information that you now know!
Let me tell you about a gold stock I just discovered that is so compelling I had to buy some. It expects to produce over 300,000 oz. of gold in 2006, at perhaps the lowest cash costs in the industry at under $60/oz., because they have copper, too. Market cap is about $450 million, and they have $50 million in cash. The drawback is that they are a little hedged, but they expect to be hedge free by mid 2006. If gold stays at $560/oz., and assuming they are hedge free, they will have a profit of $160 million, for a forward looking P/E of 2.8. That's much cheaper than Goldcorp, the other rather popular "low cost producer" with a P/E ratio of 40. If my new low cost gold producer stock rises in value to a P/E of 40, it will go up a factor of 14 times from here, and be at least another "ten bagger". And as you can see, the story is very easy to understand, the risk is low, and the stock is very liquid. And if copper and gold continue to go up, this stock will do much better that what I outlined, immediately, because they are now producing. I've never seen a mid sized gold producer in the last 6 years with a P/E this low.
To get the name of this stock, please sign up to the look at my portfolio at silverstockreport.com
Is the "Look at my portfolio" worth $40/month? See below.
Excerpt from my article: Bible Verses on how to Manage Money
Store your treasures in heaven where neither moth nor rust can steal. Recognize that it all belongs to God. And therefore, be a wise steward of what God has entrusted to you. Pay God's things to God. (only the image belonged to Caesar). The famous question about taxes was a doubled edged question, for if Jesus said "don't pay tribute to Caesar," then Caesar would have reason to kill him, but if he said "pay tribute to Caesar," then he would be against the Bible laws which say "bow to none other than God," and it all belongs to God.
Mark 12:13 The Pharisees got together with Herod's followers. Then they sent some men to trick Jesus into saying something wrong
14 And when they were come, they say unto him, Master, we know that thou art true, and carest for no man: for thou regardest not the person of men, but teachest the way of God in truth: Is it lawful to give tribute to Caesar, or not?
15 Shall we give, or shall we not give? But he, knowing their hypocrisy, said unto them, Why tempt ye me? bring me a penny, that I may see it.
16 And they brought it. And he saith unto them, Whose is this image and superscription? And they said unto him, Caesar's.
17 And Jesus answering said unto them, Render to Caesar the things that are Caesar's, and to God the things that are God's. And they marvelled at him.
Matthew 6:20 Instead, store up your treasures in heaven, where moths and rust cannot destroy them, and thieves cannot break in and steal them.
Matthew 19:21 Jesus replied, "If you want to be perfect, go sell everything you own! Give the money to the poor, and you will have riches in heaven. Then come and be my follower."
Prov 19:17 Caring for the poor is lending to the LORD, and you will be well repaid.
The Parable of the Talents
14 "Again, it will be like a man going on a journey, who called his servants and entrusted his property to them.
15 To one he gave five talents of money, to another two talents, and to another one talent, each according to his ability. Then he went on his journey.
16 The man who had received the five talents went at once and put his money to work and gained five more.
17 So also, the one with the two talents gained two more.
18 But the man who had received the one talent went off, dug a hole in the ground and hid his master's money.
19 "After a long time the master of those servants returned and settled accounts with them.
20 The man who had received the five talents brought the other five. 'Master,' he said, 'you entrusted me with five talents. See, I have gained five more.'
21 "His master replied, 'Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness!'
22 "The man with the two talents also came. 'Master,' he said, 'you entrusted me with two talents; see, I have gained two more.'
23 "His master replied, 'Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness!'
24 "Then the man who had received the one talent came. 'Master,' he said, 'I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. 25So I was afraid and went out and hid your talent in the ground. See, here is what belongs to you.'
26 "His master replied, 'You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed?
27 Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.
28 'Take the talent from him and give it to the one who has the ten talents.
29 For everyone who has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him.
30 And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth.'
Some just think it's wrong to store wealth in the form of gold, due to a misunderstanding of the parable of the talents. However, gold and silver are the only things you can use as money that you can weigh out and measure. An unjust weight and measure, such as the dollar, remains an abomination.
Why is the evil servant evil? First of all, the talent was not his money, it was his master's money! His master was sowing with him, giving him money to be put to use. A "talant" was 66-90 pounds of precious metal. It was a large amount of money. The master, representing Jesus, acted as a capitalist, who was investing his money in the man's ability to invest money. (Like an investor who buys a silver stock fund, that in turn, invests in stocks.) But the evil servant did not respect his master's capitalist ways; and he made a false accusation, he said the master reaped where he did not sow. But the master was sowing into the man, rather than into the ground! So, in a sense, the evil servant valued himself as less than dust, because his false accusation implied that it would be better to sow into the ground than into himself! The capitalist who invests with men is not doing an evil thing as the evil servant accused. The evil servant represents a man who despises capitalism, the foundation of which is private property. He despised his master's property, and he was covetous of his master's potential gain. But meanwhile, as one of his master's servants, he was consuming some of his master's property, just to live! He didn't want to work for anyone else's benefit, but felt no guilt about taking benefits from others. But all work, to be profitable, must be to the benefit of other men!
So, the story does not condemn storing gold, the story is an overwhelming support of the entire capitalist system!
Some people think the parable means it's ok to put money in the banks to get interest. But the parable does not teach that. The parable is showing that even putting money in the bank to get interest (an evil action) would have been better than entrusting money to the evil servant, who is like a covetous communist. Jesus often makes comparisons among sins to showcase the greater evil. For example, Jesus said to some:
Matthew 21:31 ...Verily I say unto you, That the publicans and the harlots go into the kingdom of God before you.
In that example, Jesus was not saying that harlotry is not a sin. Harlotry is a sin. Likewise, Jesus was not saying that loaning money at usury is not a sin. Usury remains a sin.
The parable of the talents teaches us the importance of obeying our master (our Lord Jesus Christ), and the importance of making wise investments. Sometimes, investing in silver is the best investment.
Ecclesiastes 3:1 To every thing there is a season, and a time to every purpose under the heaven:
2 A time to be born, and a time to die; a time to plant, and a time to pluck up that which is planted;
Investing in silver, as opposed to bonds, is being obedient to the commands to avoid false weights and measures, and to avoid usury. And sometimes, it’s just a time to take the money, “silver” back from the economy. A time to reap. The time to reap silver is now.