23 Aug GOLD and the FED

http://www.forbes.com/reuters/feeds/reuters/2008/08/21/2008-08-21T203934Z_01_N21515012_RTRIDST_0_GOLD-EAGLE-SHORTAGE-UPDATE-2.html

Let us talk about GOLD. US government suspends minting of American EAgles can only be good news for the bulls.

It is the largest 1 ounce GOLD that are short, meaning the buying are form the Big buyers not from the man in the street.

Bços of the high cost of extraction, (energy, facilities, labour), Gold price has to stay above a certain level to make extraction sensible. Otherwise the miners would halt, and supply would drop.

Hence there is a certain floor to Gold price on a long term basis. The largest miners are now in China, with South Africa in the second. American Gold mine are now on a down path.

There are lots of Gold ETF around, in Asia, Singapore, HK. and China launched their GOLD Futures trading last yr. GOLD buying has been a trend as a preservation of wealth, not as a speculative tool. It is not a frenzy yet, the masses have not caught on with GOLD.

The Government stops minting Gold bços the cost has escalated, and with the low Gold price at 800, it is not profitable to do so. Ironically, the Government may instead be hoarding the GOLD either bços it sees GOLD going higher, if not it itself is in negative holding of GOLD.

GATA (www.gata.org) weeks before GOLD peak at 1030, was demanding an inspection of the US Treasury GOLD, which came to no conclusion. Has the Treausry been depleting US GOLD to enter into loan/swap agreements to generate revenue ? And that make the real GOLD holding of the US government much lesser than what is on the books.

Hence the real question is NOT how much of GOLD the public holds in ETFs, but how much of GOLD does the Treasury really owns ?

And Bernanke has said that he glances at the price of GOLD occasionally during the day. The FED is mindful of the price of GOLD. Bços GOLD stands for the TRUTH.

in the 1800's, Americans, UK, Dutch, French sells opium to China in exchange for gold, silver, jades, ornaments, etc. A big portion of the GOLD held by ECB, and US orignates from China.

China/Japan/India and other Asian countries have very low holdings of GOLD in relation to their foreign reserves.

With USD at current level, it is good time to diversify from Treasuries bonds, Fannie Mae, Freddie Mac bonds to GOLD. And that explains why US is running out of GOLD to mint the American Eagles.

It is the first sign of US Treasury cracking. The biggest credit crisis is not the Bear Sterns, Lehman Brothers, or Fannie, Freddie, it is the FEDERAL RESERVE. Note the word "RESERVE". When the RESERVE runs out of reserves, it is going to be the Mother of all Bubbles.