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KEYNOTE SPEECH AT SYDNEY GOLD SYMPOSIUM 14-15 NOVEMBER 2011 By ALF FIELD
* Monday, November 14, 2011 
THE MOSES PRINCIPLE
The Moses Principle is an irreverent theory based on the question of why Moses spent 40 years traversing the Sinai desert before leading the Israelites to the “promised land”.
God was powerful enough to send numerous plagues to devastate the Egyptian economy until Pharaoh allowed the Israelites to leave Egypt. Later God caused the Red Sea to part so that the Israelites crossed on a dry sea bed. When the pursuing Egyptian army and their chariots were in the sea bed, the waters crashed back and drowned them.
If God was powerful enough to do all of these things, why not allow the Israelites to go straight to the “promised land”? Why did Moses spend 40 years traversing the barren desert before leading the Israelites to the “promised land”? Here is the irreverent theory. Every Israelite over middle age when they left Egypt probably died during the ensuing 40 years. The younger people were born in the desert or spent their adult lives in the desert. After 40 years the life experience of the survivors consisted of living in the desert. When they finally got to the “promised land” it appeared to be “flowing with milk and honey” when compared to their prior desert existence.
A total generational change had taken place so that the survivors had no knowledge of anything other than the desert. There was nobody who could remember what Egypt was like. The Moses Principle recognizes the fact that over any 40 year period, a generational change takes place.
What has this got to do with gold? Recently we passed the 40th anniversary of 15 August 1971, the date when the last link between currencies and gold was ended by President Nixon. This launched an era of floating “I owe you nothing” currencies. Money was what any government deemed it to be, generally something that the government could create in unlimited quantities. That system, plus the fractional reserve banking system, launched an era of ever increasing debt and credit. It was an era where debt was desirable and money lost its purchasing power.
Everyone in this room has spent their adult lives living under this system. Most have had no exposure to monetary history or what money really is. The new “Moses” generation will have to re-learn the lessons of monetary history before the world can enter a new era of sound money and stable economic growth. The impact of this generational change will be discussed later.
The 15 August 1971 was an important date for me personally. I had grown up in South Africa and in early 1970 started a funds management company with a good friend of mine. The first 18 months was a struggle as we were buffeted by a vicious bear market. By August 1971 our clients were largely in cash awaiting the end of the bear market or an inspirational idea.
That inspirational idea came on 15 August 1971 when I heard that President Nixon had decreed that the USA would no longer exchange US dollars held by foreign governments for gold at $35 per ounce. Gold had limited downside but appeared to have good potential for substantial gain. Gold shares were deeply depressed after 37 years of a fixed $35 gold price, another “Moses Principle” period. We bought gold shares aggressively. This proved to be an astute move and our funds management business was launched on a successful path.
Having locked ourselves into a big position in gold shares, we needed to have some idea of how the gold price might perform and how high it might rise. We ran into the conundrum that has confounded fundamental analysts since 1971. How do you value something that has no utility value, no earnings or net asset value, does not spoil or corrode and is not used up?
Other commodities such as copper, soya beans and corn etc., are priced using a combination of demand, supply and stocks. If demand exceeds supply, stocks diminish, shortages develop, prices rise and new production comes on stream. Eventually supply exceeds demand, stocks build up, prices decline and marginal producers go out of business. The cycle then repeats itself. Other commodities are produced for consumption while gold is accumulated.
Consequently large stocks of gold exist in official hands as central bank reserves. There are also large stocks of gold in private ownership, in vaults around the world, in homes, buried in gardens, in coins and gold jewelry. New mine production of gold is tiny compared to available stocks. In 1971 official holdings of gold were about 37,000t. Cumulative world gold production throughout history up to 1971 was estimated to be about 90,000t, so investors/hoarders must have owned at least as much as the official holdings. In 1971 world gold production was a mere 1,450t, or less than 2% of the estimated amount of gold held in the world at that time.
The fundamental conclusion was that the owners of the large stocks of gold would determine the future of the gold price. If they became net sellers, the gold price would decline. If they became net buyers, the gold price would rise. There were reasons to believe that they would be net buyers. The world had been launched into an untried experiment where all countries were subject to Government fiat currencies and, in addition, there was a latent group of buyers in the wings. Americans had been prevented by law from holding gold since 1933. With the collapse of the gold exchange standard on 15 August 1971, there was no reason for this prohibition to continue. On 31 December 1974 (another Moses generation period from 1933) the largest and wealthiest nation on Earth allowed its citizens to buy and own gold.
The obvious conclusion was that it was necessary to resort to technical analysis to find a way to predict movements in the gold price. I experimented with a variety of technical systems and then got lucky. I discovered that the Elliott Wave Theory (EW) gave superb results in predicting the gold price. I couldn’t get the same great results using EW in other commodities or markets. EW is a complicated system with many difficult rules, but I will try and explain it in simple terms.
The technique is to concentrate on the corrections. In terms of EW, the sequence in a bull market is as follows. The market rises, has a 4% correction, rises, has a 4% correction and rises again. At this point the next correction jumps from 4% to a larger degree of magnitude, say 8%. The market then repeats the sequence. A rise, a 4% correction, a rise, 4% correction, a rise and another 8% correction. When the market is eventually due a third 8% correction, the magnitude of that correction jumps from 8% to 16%. This sequence is repeated until two 16% corrections have occurred when the size of the next big correction jumps to 32%.
The beauty of EW is that the corrections in gold are remarkably regular and consistent. Early in 2002 I picked up the 4%, 4%, 8% rhythm in the gold market which convinced me that a new bull market had started in gold. Another feature of EW is that once one is confident that these percentages have been established and one has some idea of the approximate size of the up moves, simple arithmetic allows one to calculate a forecast of the future price trend.
Using this method I calculated that the gold price should rise from the $300 ruling in 2002 to at least $750 without having anything worse than two 16% corrections on the way. That was valuable information at that time. Furthermore, from the $750 target a big 32% correction could be expected to about $500. Then the bull market would resume, rising to perhaps $2,500 before another 32% correction occurred. The final up-move would take the gold price to much higher levels, possibly $6,000. Once again, a valuable insight when gold was $300 in 2002...
Read On:
http://www.jsmineset.com/
George.
Gold traders most bullish since 2004 on debt crisis
* Saturday, November 12, 2011
LONDON: Gold traders and analysts are the most bullish in at least seven years as investors accumulate metal at the fastest pace since August to protect their wealth from a widening European debt crisis. Twenty-one of 22 surveyed by Bloomberg expect bullion to rise on the Comex in New York next week, the third consecutive increase and the highest proportion in data going back to April 2004.
Holdings in exchange-traded products backed by gold rose 27.5 tonne this week, within 1% of the record set almost three months ago, data compiled by Bloomberg show. Gold exceeded $1,800 an ounce for the first time in seven weeks on November 8 and hedge funds are holding their biggest bet on higher prices since mid-September , Commodity Futures Trading Commission data show. The metal is rebounding after tumbling as much as 20% in three weeks in September. Almost $9 trillion was wiped off the value of global equities since May and yields on Italian and Greek bonds rose to euro-era records this week. "Throughout history gold has protected people from the sort of turmoil that we're seeing," said Mark O'Byrne , the Dublin-based executive director of GoldCore, a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars.
http://articles.economictimes.indiatimes.com/2011-11-12/news/30391300_1_gold-traders-gold-survey-history-gold
George.
It's a GOLD producer but what the hey! Caledonia Mining 2011 Third Quarter Results http://tmx.quotemedia.com/article.php?newsid=46015428&qm_symbol=CAL
Operational Highlights
Gold produced by the Blanket Mine in Zimbabwe in the Quarter increased by 18% to 9,743 ounces from the 8,226 ounces produced in the 2nd quarter 2011 (the "preceding quarter") and was 97% higher than the 4,935 ounces of gold produced in 3rd quarter 2010 (the "comparative quarter"). This is the sixth consecutive quarterly increase in gold production.
Average gold recovery increased to 93.1% from 92.9% in the preceding quarter and from 91.3% in the comparative quarter reflecting the benefits from investment in improvements to the milling and Carbon-in-Leach ("CIL") circuits.
Cash operating costs at the Blanket Mine in the Quarter were US$583 per ounce of gold produced compared to US$585 in the preceding quarter and US$651 in the comparative quarter.
CALVF Caledonia Mining Corp.(.11) 30-40 thousand ounce per year gold producer based in Zimbabwe.
Website: http://www.caledoniamining.com/index.php
TSX Ticker CAL: http://tmx.quotemedia.com/quote.php?qm_symbol=cal
IHUB: http://investorshub.advfn.com/boards/board.aspx?board_id=5294
HUI continues its strong showing By Trader Dan
* Monday, November 7, 2011
Mining shares are getting a very strong bid in today's session taking the HUI up sharply through the 600 level, a psychological resistance level. As you can see on the chart, the index is moving ever closer to the top of the recent chart gap created last month when the shares were sold off during a downdraft in both the gold and silver bullion markets. I would expect the perma bears in the shares to try to make an effort to hold the index BELOW this resistance level. If they fail, I believe there will be enough momentum in the sector to mount a move back to the recent all time high.
Downside support is back at the bottom of the gap and is noted.
Note how the miners are continuing to outperform the broader equity markets today as they have done so over the last month.
Also note the much longer term monthly ratio chart I have constructed showing the performance of this sector against the broader US equity market over the last decade+.
http://traderdannorcini.blogspot.com/2011/11/hui-continues-its-strong-showing.html
George.
Click on "In reply to", for Authors past commentaries.
***** Latest Commodities Report shows Bank Participation in the Futures and Options Market *****
Updated November 1, 2011
The banks Increased their short positions in Gold and in Silver since last month.
http://www.cftc.gov/MarketReports/BankParticipationReports/index.htm
George.
Click on "In reply to", for Prior Reports.
Right back into silver 
. $34.25!
Striking Euro Gold (and Silver)
* Tuesday, November 1, 2011 
PRINCETON – The alternatives for Europe’s currency, the euro, seem increasingly limited to a desperate muddling through or a chaotic collapse. But there is a bolder and more productive approach that relies on past experience with multiple currencies.
The threat posed by Europe’s current policy impasse can hardly be overestimated. In the early 1930’s, monetary-policy incoherence paralyzed US policy, with the Federal Reserve Bank of New York locked in insurmountable conflict with the Chicago Fed over monetary easing (at that time through open-market securities purchases). Today’s chronic policy disputes between Germany and France are producing a level of uncertainty that is potentially even more destructive.
Every few months, European governments launch a new and ever more ingenious initiative to resolve the eurozone’s debt crisis. For a day (and sometimes only for a few hours), financial markets rally euphorically. But soon doubt sweeps back in. There is no sense of a realistic endgame. And there is no longer-term vision of how the fiscal integration needed for the effective operation of a monetary union could be achieved in a practical timeframe.
Europeans should look to the past, when previous crises produced innovative solutions. The extended crisis of the European Monetary System (EMS) between September 1992 and July 1993 looked as if it would derail European integration. What was initially seen as a problem in one country (Italy) toppled other currency regimes like dominos: Britain, Spain, and Portugal – and, by July 1993, even France was vulnerable. Then, as now, Europe’s future was at stake.
The solution adopted in frantic late-night negotiations in Brussels initially looked counterproductive. The massive widening of the EMS bands to 15% on either side of a central parity initially made a single currency appear more remote. But it also took away the one-way-bet character of speculative attacks on vulnerable currencies, and thus removed the fundamental driver of instability.
The modern equivalent of the band widening of 1993 would be to maintain the euro for all members of the eurozone, but also allow some of them (in principle, all of them) to issue – if necessary – national currencies. The countries that did would probably find that their new currencies immediately traded at a heavy discount. California recently adopted a similar approach, issuing IOUs when faced with the impossibility of access to funding.
The success of stabilization efforts could then be assessed according to the price of the new currency. If the objectives were met – fiscal stabilization and renewed growth – the discount would disappear. In the same way, after 1993, the French franc initially diverged from its old level, but, in a good policy setting, it then returned within the exchange-rate band.
This approach has an important advantage: it would not require the redenomination of bank assets or liabilities. As a result, it would not be subject to the multiple legal challenges that a more radical alternative would run into.
Of course, there would also be the possibility that no convergence would occur, and that the two parallel currencies would coexist for a much longer period. This is not a novel thought. One of the possibilities raised in the discussions on monetary union in the early 1990’s was that a common currency might not mean a single currency. That possibility is not just a theoretical construct in fringe debates two decades ago; it is a real historical alternative.
In fact, there is a rather surprising parallel for stable coexistence of two currencies over a long period of time. Before the victory of the gold standard in the 1870’s, Europe had operated with a bimetallic standard for centuries, using silver as well as gold. Each metal had its different coinage. This regime was so successful in part because the coins were used for different purposes. High-value gold coins were used as a reference for large-value transactions and international business. Low-value silver coins were used for small day-to-day transactions, including payment of modest wages and rents. Silver was what Shakespeare termed the “pale and common drudge ‘tween man and man.”
A depreciation of silver relative to gold in this system would bring down real wages and improve competitiveness. Early modern Italian textile workers would find their pay in silver reduced, while their products still commanded a gold price on the international market for luxuries. This is one of the reasons why theorists such as Milton Friedman considered a bimetallic standard inherently more stable than a monometallic (gold-based) regime.
Nowadays, the equivalent of the adjustment mechanism in the early modern world of bimetallism would be a fall in, say, Greek wage costs paid in the national currency, as long as it was traded at a discount. These would be the silver currencies.
Meanwhile, the euro would be the equivalent of the gold standard. It would be kept stable by the institutions that already exist today, the European Central Bank and those national central banks that have no new alternative. In this sense, the core countries would be the equivalent of eighteenth- and early nineteenth-century Britain, which had only a gold-standard regime.
Maintaining a choice of currencies in a national as well as an international setting seems odd and counterintuitive. But it can – and has – been done, and it can be remarkably successful at satisfying peak demand for stability.
http://www.project-syndicate.org/commentary/james60/English
George.
Still Work To Be Done In Silver?
* Saturday, October 29, 2011
Most likely.
Commercial traders' (smart money) long and short postions showed massive long buying and short liquidation towards the end of the D-wave decline in 2008. This was the perfect money flow setup. A similar setup is underway in 2011. Massive short liquidation, defined by statistical concentration, will likely mark its end in 2011-2012.
Silver London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Long & Short As A % of Open Interest
Smart money wants (needs) to cover its shorts. Who will be the source of selling?
Silver's bounce from the October low has attracted retail buying (see red circle). Smart money will likely target thse new longs in effort to further reduce their short positions as they did in 2008.
Silver London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest
Hi Eric is it possible for us to make the chart Silver or Gold COT ZScore weighted average of long and shorts as a % of OI?
It is ineteresting to see how that % evolves in the coming weeks before we will/could have a real advance out of these prices.
Gretings and thanks for the site.
Bert
http://edegrootinsights.blogspot.com/2011/10/still-work-to-be-done-in-silver.html
George.
HUI technical chart By Trader Dan
* Friday, October 28, 2011
The HUI put on a spectacular showing this week gaining more than 65 points and taking out several overhead resistance levels on its price chart in the process. The catalyst seemed to be the positive response by the broader equity markets to news coming out of Europe regarding their bank recapitalization plan and their funding of the Stability Mechanism. While I am personally repulsed by such actions the facts are that the hedge fund community could not wait for the ink to dry on the press release before they began pouring money back into the Risk Trades.
The resultant rally in stocks fed into the gold mining shares with the HUI actually outperforming gold this week.
We will have to wait to see whether there is a continuance of these risk trades next week but from a technical perspective the strong price action bodes wells for additional gains early next week. That would put the index up against a strong overhead chart resistance level coming in near 595 and extending towards 600. The shares have been stymied near this level in the past so the bulls have a big test of resolve coming.
The push past the last Fibonacci Retracement level of note near 580 should allow the index to first test the level just a few point above today's high. Should the bulls take this out, then the run towards major resistance will commence.
If the index sets back, dip buyers should surface down near the 560 level and again near 545.
My thinking is if we are moving back towards a period when RISK TRADES are back in vogue, the HUI should continue to lead the metals and outperform gold in particular. Note on the chart it is close to decisively ending the downtrend against the gold price. If the shares are going to eventually take a leading role then the horizontal resistance level noted on this ratio chart will need to be bested.
As a side note, that we are seeing some companies in this sector raising their dividends is a good sign and indicates that their management feels that earnings are strong enough to do so and should remain so for the foreseeable future. In other words, they are optimistic on future price prospects for the metal. That is also a sign that we should expect to begin seeing or hearing about planned aquistions by some of the majors or even larger mid-tiers as they look to increase their reserves. That should support the juniors which are of high-quality. This might be occurring already based on the ratio of the GDX to the GDXJ (major to juniors).
Note that since May of this year the majors have been outperforming the juniors as a whole. Beginning late last month (September) that began to change. Apparently some are already sniffing this change and are thinking acquisitions based on the profitability of the larger miners in the sector.
http://traderdannorcini.blogspot.com/2011/10/hui-technical-chart.html
George.
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