THE THE GOLD GOLD WARS WARS A Golden Renaissance A Tribute to Ferdinand Lips (1931 – 2005)
WHAT ARE GOLD WARS? Gold Wars are between governments and gold. This ultimately restricts the constitutional rights of the people. Gold is the vital barometer of the health of a nation’s currency. The suppression of gold by government allows them to mask the mismanagement of their currency. The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
MONETARY POLLUTION The dollar’s purchasing power has been trashed in the post-war period. One dollar can buy you less than one ninth of what it could have in 1950. DOLLAR – PURCHASING POWER PARITY BASIS 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Jan-50 Jan-53 Jan-56 Jan-59 Jan-62 Jan-65 Jan-68 Jan-71 Jan-74 Jan-77 Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
GLOBAL DEBT MOUNTAIN Today’s system of paper money is still very young. It depends solely on the belief that the debts upon which it is based will be repaid someday. TOTAL DEBT & LIABILITIES AS % OF GDP 400% Cost of ageing Structural deficit 200% Initial debt level 0% -200% -400% -600% -800% -1000% -1200% -1400% -1600% -1800% Italy Germany France Portugal USA UK Spain Ireland Greece Sources: EU Commission, Eurostat, CBO, IMF, Morgan Stanley Research The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
FERDINAND LIPS (1931 - 2005) “Gold Ferdi, the Pope of Gold” , Karl Otto Pohl , former Head of the Bundesbank He’s back but arguably he never left us – as his life’s work lives on through the Lips Institute www.lips-institute.ch The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
GOLD WARS Gold Wars are between governments and gold. This ultimately restricts the constitutional rights of the people. The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
GOLD WARS OF THE 20TH & 21ST CENTURIES 1. The Classical Gold Standard is abandoned in 1914 2. The Genoa Gold Standard 1922 3. Great Depression of 1930s – Exchange Stabilization Fund, Gold Reserve Act 1934 4. Bretton Woods 1944 – Gold Exchange Standard 5. Collapse of the London Gold Pool 1960s and 70s 6. Stagflation of 1970s and US Treasury and IMF Gold Sales 7. The Failure of the Second London Gold Pool of 1990s and 2000s? The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
THE LONDON GOLD POOL 1960 – 68 The Gold Price was fixed at $35 a troy ounce $38 1954 – 1968 Morning Fix, Left Axis, London Gold Market US Gold Reserves Yearly Tonnes, Right Axis $37 The London Gold Pool is dismantled Berlin Crisis $36 London Gold Pool established Cuban Missile Crisis $35.50 Gulf of Tonkin Incident De Gaulle’s gold speech Suez Canal nationalised Six day war $35.25 London Gold Suez Crisis – France, market reopened Israel and Britain invade Egypt $35.20 $35.15 $35.10 21,000 $35.05 19,000 First official US combat troops arrive in Vietnam $35.00 17,000 France leaves the Gold Pool $34.95 15,000 British pound devalued 14% October 1960 gold crisis begins $34.90 13,000 as gold breaks $35.20 Tet Offensive $34.85 11,000 9,000 1954 1956 1958 1960 1962 1964 1966 1968 Source: Financial Graph & Art The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
THE TWO-TIER GOLD MARKET 1968 When the Gold Price was fixed at $35 1967-1971 Morning Fix - London Gold Market $46 South Africa sells gold Nixon ends for foreign currency gold convertability $44 3 6 $42 5 $40 Run on US dollar, deutche mark allowed to float $38 Gold Pool dismantled, 1 price spikes up South African gold 2 boycott begins $36 4 South Africa accepts $34 US compromise. London gold hits lowest level in history. 1968 1969 1970 1971 Source: Financial Graph & Art The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
GOLD IS UNDERVALUED Price is the level at which one exchanges; value is whether it is worth it. Nominal new price highs in gold do not signal an overvalued market. The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
GOLD IN ‘REAL’ DOLLARS IS STILL VERY UNDERVALUED Gold in current dollar terms is still 30% off the high it reached in 1980. Re-basing, hedonistic adjustments, etc have lowered the CPI levels and with it the true value of gold adjusted for inflation. GOLD IN CURRENT DOLLARS 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Mar-70 Mar-72 Mar-74 Mar-76 Mar-78 Mar-80 Mar-82 Mar-84 Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
GOLD IS UNDERVALUED IN CURRENCY TERMS The official gold reserve in banks throughout 1930s to 1950s was 40% but in reality was much higher. Even to achieve this backing, assuming current gold supply, the price of gold will have to rise by three to four times. GOLD BACKING OF THE U.S. MONETARY BASE (CURRENCY IN CIRCULATION + BANK RESERVE CASH) 150% 125% 100% Gold-Backed 100% 75% 50% 25% 0% 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Sources: U.S. Federal Reserve / World Gold Council The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
COMMODITIES ARE UNDERV ALUED RELATIVE TO US EQUITIES Commodities as a whole are very cheap compared to equities. At Hinde we believe commodities will rise as currency creation competes with supply constraints. This will be gold positive. CRB/S&P RATIO 4 3.5 3 2.5 2 1.5 1 0.5 0 Oct-57 Oct-60 Oct-63 Oct-66 Oct-69 Oct-72 Oct-75 Oct-78 Oct-81 Oct-84 Oct-87 Oct-90 Oct-93 Oct-96 Oct-99 Oct-02 Oct-05 Oct-08 The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
GOLD IS UNDERVALUED VERSUS US EQUITIES Gold vs S&P would have go up six times to match the 1980 highs. GOLD RELATIVE TO S&P 500 600 500 400 300 200 100 0 Oct-70 Oct-72 Oct-74 Oct-76 Oct-78 Oct-80 Oct-82 Oct-84 Oct-86 Oct-88 Oct-90 Oct-92 Oct-94 Oct-96 Oct-98 Oct-00 Oct-02 Oct-04 Oct-06 Oct-08 Gold/S&P The Mining Journal Investor Seminars All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed. Date: 07/09/10 The presentation is for information purposes only and is not a solicitation to invest. Unauthorized reproduction or distribution is strictly prohibited.
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