Gold, the Real Story this Month

May 7, 2004

Although silver got smashed this month the real story is in gold.

Let us restate and expand upon (as follows, below) what we published in our monthly report a scant three days ago.

First of all, as most are aware, the Rothschild interests are no longer "fixing" the price of gold in London. There has been much speculation about this event. Our view is the old adage that "he who owns the gold makes the rules" is still valid; and the Rothschild interests are moving away from the paper gold market but not necessarily the real gold market.

Of even more interest to us were documents provided to the Sierra Club that buttressed certain disturbing claims of former Echo Bay Mines employee, Allan Laird about Kinross, and the mining industry at large.

Laird says his elected representative and the Department of Homeland Security were indifferent to evidence he presented about Echo Bay - since acquired by Kinross -paying protection money to known terrorists linked with Al Qaeda.

Documents given to the Sierra Club show payments and supplies, including weapons, delivered to terrorists in return for unspecified security services at the Kingking project in the Philippines; equally disturbing, internal company memos reveal hair-raising conditions at the mine.

The most important point to be made is this statement, released to the general public on Thursday: "The US Department of Justice announced that it will in fact investigate Echo Bay."

We immediately contacted our sources in Washington D.C. and asked if in fact an investigation would truly begin. The answer was yes.

Now comes word of an even more damning event - as regards gold - reported by the Associated Press:

Bin Laden Said to Offer Gold for Killings

CAIRO, Egypt - A statement attributed to Osama bin Laden offered rewards in gold Thursday for the killing of top U.S. and U.N. officials in Iraq.

The transcript of an audio recording dated Thursday appeared on a Web site known for militant Islamic messages. The Web site gave links to hear the statement, but none were working.

"You know that America promised big rewards for those who kill mujahedeen (holy warriors)," the transcript read. "We in al-Qaida organization will guarantee, God willing, 10,000 grams of gold to whoever kills the occupier Bremer, or the American chief commander or his deputy in Iraq."

He was referring to L. Paul Bremer, the chief U.S. administrator in Iraq, and top military officials.

The authenticity of the statement could not immediately be verified.


To be crystal clear we did not have inside information when we wrote three days ago that the next shoe to drop in the fight against gold would be an identifiable link with terrorism.

Sure, we didn't like writing it, and our readers no doubt didn't much like what we had to say. But the "reality on the ground" is what we need to deal with. Our long and continued study and participation in the precious metals markets led us to our conclusion. But even so, we were not sufficiently cynical to expect it would happen this rapidly.


Let us develop further what this means for the precious metals investor, and why certain bureaucratic forces would want to paint a picture of a world awash in gold and terrorism.

Gold is first and foremost a political metal in that it is fungible and leaves no tracks. Cash can be "laundered" - but, heck, gold is a virtual Laundromat. It is malleable, untraceable, easy to transport and extremely valuable.

You and I know that once upon a time, not so long ago, there was one currency, worldwide, and it came in the form of the yellow metal - gold. (Silver, my favorite, was a close runner-up.) But that wasn't good enough for the internationalist crowd. They want a fiat money - paper - global currency, preferably not backed by gold at all. They want the flexibility to create as much debt-money as they want, when they want and to charge governments (you and I) massive amounts of interest for printing that money.

In the 1970s, they tried to control the price of gold and it got out of hand. They tamed the price and then instituted what some (correctly in my opinion) have termed a "conspiracy" to keep the price of gold down through the 1990s. This was accomplished through massive short selling of the metal, through the "carry trade" and by simply talking the price down. (For a while, in the late 1990s when the price of gold was threatening to rise, you couldn't get through a month without one central bank or another announcing a phony "sale" of their gold assets to be held in the not-too-distant future - a future that often, unsurprisingly, did not come.)

There's no gainsaying that gold has been on a tear these last few years, a powerful uptrend. Even though the short term technical picture looks blurry right now, gold very obviously has not lost its allure, especially not for Asia's growing and powerful economies.

I can only imagine the frustration of those who want to stomp on the price of gold. After all these years of price-fixing the "barbaric" metal, shorting it, selling it, damning it regularly in the press, gold just keeps popping back up like some kind of fiendish, glittery jack-in-the-box.

They just don't get it. Gold's allure is not the product of some irrational, historical hiccup. It's the end result of thousands of years of money competition. It's won its place because people liked to trade it better than salt, beads, sugar, spices and all the other things that have been tried through the ages. The marketplace chose gold (and silver). And what the marketplace chooses cannot easily be undone.

This has to be the latest gambit. They can't fix it, short it or talk it down any longer. So make the link between gold and terrorism. Just come right out and tell people that those who own gold, trade gold and pay in gold are apt to be terrorists.


So let the congressional investigations begin into a "link" between gold and terrorism! The general public will soon be educated, no doubt (via massive media coverage) to associate the two. And this approach - if it happens as I suspect - will probably provide enough ammunition for one final washout in the gold market, meeting our expected low in July of 2004.

Please remember: Gold below $400 U.S. is a solid buy; silver at $7.00 or lower is also a steal. We have highly recommended to our readership that they finish their physical purchases over the next few months.

This mainstream financial media - in the service of their political and banking masters - may continue the effort to portray gold in the worst possible light, but the metal will continue to outshine most other investment choices in the longer term as it has for thousands of years.

David Morgan ( is a widely recognized analyst in the precious metals industry; he consults for hedge funds, high net-worth investors, mining companies, depositories and bullion dealers. He is the publisher of The Morgan Report on precious metals, the author of Get the Skinny on Silver Investing, and a featured speaker at investment conferences in North America, Europe and Asia. You can receive a free 30 day trial subscription here

The word ‘silver’ originates from the Old English Anglo-Saxon word 'seolfor'