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*** Richard Russell on Gold ***

Gold: The messenger
Richard Russell
Dow Theory Letters snippet
Jun 3, 2003

Extracted from the 02 June 2003 issue of Richard's Remarks . . .

Gold --as I've noted, every night gold is knocked down by some unseen individuals or group of individuals. Then during the day gold magically rises to the plus side.

The case for owning gold has become overwhelming. The Fed is inflating and the broad money supply is expanding at an annualized rate of 7.2%. Beyond that, the unfunded liabilities of the US government are at a total of $44 trillion. The latter we learn from a report that was first suppressed by the Bush administration, but which was released, once the statistics were "out of the bag." How in God's name the US will address this crushing future burden I don't know. The Bush administration will hold off addressing this staggering problem until, you guessed it -- "after the election."

It seems to me that government programs such as Social Security and Medicare will have to be cut and at the same time the US money supply will have to be vastly expanded as these programs are paid for -- with more blizzards of paper. How the dollar will survive all this is a mystery to me. But as I said, all the above make the rationale for owning gold almost irrefutable.

"The market always does what it's supposed to, but never when," runs the old adage, and I believe this pertains to gold and gold shares. Years of adverse propaganda and Fed-sponsored nonsense have gone a long way towards tarnishing gold in the mind of the US public.

The US Constitution defines the dollar in terms of gold and silver, not in terms of cotton and linen. This truth has been obscured, even denied, by central bankers. It has been ignored by Congress and by the Supreme Court. But then, getting around the Constitution has never been a problem for Congress. And a few cynics claim that the Constitution is simply what the Supreme Court says it is. I'm not one of the cynics, by the way -- I think the Constituion means exactly what it says.

Somewhere ahead I expect that we will witness an all-out panic to own the yellow metal. In the meantime, consider the present as the first phase in the gold bull market. The first phase is the phase wherein informed investors accumulate an underpriced asset. The most underpriced asset on the face of the earth today is gold. While tens of billions of dollars are being produced by today's Fed, the production of gold from the mines is actually decreasing.

For the benefit of new subscribers, you should know that gold is seen as a menace by the central banks. The central banks want to be free to inflate without fear of contradiction. Gold is the contradiction. A rising gold price acts as a red flag, a sign saying "STOP," as far as the central banks are concerned.

Deep within the unconscious of man is the instinct that tells him that gold is money and that a rising gold price is a "danger-flag." Even decades of anti-gold propaganda has not obliterated that deep instinct. This is why the central banks fear rising gold. Gold is not only real money, it's "the messenger." It's this messenger aspect of gold that frightens central bankers. It's gold that ultimately exposes their inflationary manipulations -- the manipulations that systematically rob all savers of the fruits of their labor.

More follows for subscribers . . .

Richard Russell
Dow Theory Letters
© Copyright 2003 Dow Theory Letters, Inc

http://www.321gold.com/editorials/russell/russell060303.html

Dan