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Stop Whining, Please. Look at Your Neighbors.


http://www.kitco.com/ind/nadler/oct232008B.html


By Jon Nadler
Oct 23 2008 4:26PM


www.kitco.com

Good Afternoon,

Bullion prices dipped to under $700 for the first time this year. If we can say one good thing about today's continuing price rout, it is that it might not end with the metal closing in the 600's. Comparisons are futile, as each successive freefall since the middle of the year had its own peculiar but deadly flavor - this last one however, is perhaps even more perverse and worrisome than most that came before it. There remains no technical chart to be found on Kitco's back pages that does not show gold breaking through 200-day moving-average lines with a depth and sharpness such as what began on July 7.

An ugly, unmitigated disaster, this. And this morning, as well as this afternoon the metal continued to fall despite an easing dollar and rising crude oil price. Decoupling? Depends on your definition of the term. The nosecone has come off this rocket, and the gyroscope has spun out of control. You are now actually being told not to read the gold-related news in order to avoid fainting. Don't know about you, but there are faint signs that some may be ready to capitulate. In any case, they have run out of explanations faster than the cheese shopkeeper in the Monty Python sketch.

New York spot trading maintained double-digit losses after the close of futures. Fund liquidation remained quite visible during the day. At last check, the yellow metal was trading at $715, off $13 on the day. Raising cash is still at the top of everyone's list of priorities. Even the World Gold Council has chimed in on the 'bewildering slump' by acknowledging the unwinding of the long-gold short-dollar positions that have served so many, so well, over the past several years. Silver lost 2 cents at $9.47 and more sharp losses were recorded in platinum, which stayed at $793 per ounce, off $50. Palladium gave up $6 to finish at $169.

Frankly, we fail to see the 'surprised' part of this, and other recent analyses. Didn't gold's buyers buy the stuff as the asset of 'last resort'? Are we not at a juncture where 'last resorts' are being...resorted to? Why wouldn't a buyer of $400 gold let go of at least some of it, at a time when his stock portfolio shows it has lost half of its value? Exactly when, is the time to sell gold? Oh, yes, we know. At a time when the socio-economic landscape looks like something from "Soylent Green." A little late, no? See the BBC story below and think for a minute.

Today's news roundup reveals more of the same, only the players' names are different: Goldman will mothball 3200 employees, Credit Suisse loses billions, Wachovia loses the most ever lost by a bank, Sweden and New Zealand cut interest rates, UK retail figures worst since 2006, Japan's trade surplus shrinks 94%, GM starts ;involuntary' layoffs of salaried workers. We could go on. What's the point. Mr. Bush is hastily arranging another global summit to discuss ways to avoid a repeat of what is taking place now. May we humbly offer a couple of pieces of advice: skip the obligatory gourmet dinner the night before, show up in short-sleeve shirts, and address not that which might happen, but that which is happening. Oh, and don't forget to invite your successor, Mr. Bush. Wouldn't be prudent...at that juncture.

And now, for something really serious. We would like you to stop and step aside from the day's micro-worries and all of the fretting about money, and put things into perspective. The starkest, most graphic perspective. See how you feel when you start your day tomorrow, after you read this shattering report from the BBC:

This year's harvest in Zimbabwe has been the worst in the country's modern history.

In Mashonaland West province, some people are trying to survive by eating wild fruit and digging for roots


If we don't get help now, most of us are going to die. Nearly everyone here is starving

Mashonaland West villager

"It's very very bad. I've got 12 children and it's hard to find anything to give them," says a local village chief. "The whole of my village is struggling. No-one has food.

"There's nothing left here. So there's nothing I can do."

Driving deep into Mashonaland West is a reminder that most Zimbabweans live in rural areas.

The area around Karoi - 200km (124 miles) north of the capital, Harare - provides an illustration of the suffering currently being experienced in the countryside.

Farmers are without seeds, fertiliser and fuel. Next year's harvest is already being written off as a disaster as well.

As the political paralysis over the formation of the new power-sharing government continues, people are experiencing severe food shortages brought on by the catastrophic mismanagement of the economy and the virtual destruction of the country's commercial agricultural sector.

School dropouts

Some Zimbabweans get by on one meal a day if they are lucky, but there is a growing sense of desperation.

A person hold the amount of money needed to buy a loaf of bread in Harare in September 2008

Wads of cash are needed to buy what food is available in towns

One consequence is that thousands of children are said to be dropping out of school to look for food.

"In one district, 10,000 children of a population of 120,000 left school in a period of six months," says Rachel Pounds, country director of UK charity Save the Children.

"There's a lot of lost hope. Zimbabweans put up with things that get worse and worse, but you can see the despair in some of the poorer families in the villages.

"It's causing a breakdown of the community when people have to leave in order to find food," she added.

One villager in Mashonaland West pleaded for help before it was "too late".

"If we don't get help now, most of us are going to die. Nearly everyone here is starving."

Map

He showed me three tins of stored maize, but said that with seven children to feed, the supply would only last for a week.

Earlier this month, the UN World Food Programme appealed for $140m (£86m) to provide vital relief rations over the next six months.

The UN warned that more than five million people (45% of the population) could need assistance by early 2009.

In the meantime however, non-governmental organisations working in Zimbabwe have been hit hard by the economic collapse of this once prosperous country, and the resulting cash crisis stemming from levels of inflation that are now completely out of control.

But it is not just the rural population which is suffering.

Bizarre and depressing

In the towns and cities, food is also in increasingly short supply.

A walk around a suburban supermarket in Harare is a bizarre and depressing experience.


We are distinctly aware that this is a food crisis that is growing

USAid's KarenFreeman



One store I visited looked as though it was in the final stages of a clearance sale.

Only two of the 19 check-out tills were operating, and most shelves were entirely empty.

There was no milk, cheese, margarine or yoghurt.

Some cabbages, onions and limp bunches of spinach were available, along with a few odd packs of frozen meat.

The aisles intended for household goods such as soap and toilet paper were empty and closed off.

The only fresh-looking food items in the shop were a few loaves of bread, priced this week at Z$30,000 a loaf (about $1).

However, Zimbabweans are only permitted to withdraw Z$ 50,000 a day from the banks.
A boy lifts a tin of water from a hole in Harare in September 2008
Residents of Harare are digging holes to find water

Most people often cannot afford what little food is available.

Only those fortunate enough to have access to foreign currency can circumnavigate the shortages.

"We are distinctly aware that this is a food crisis that is growing," says Karen Freeman, the director of USAid in Zimbabwe.

"The issue of urban vulnerability has never really been felt here before.

"You could go to the store and buy food in the past, but now you have no option.

"There's no food in the store and there's no food on the ground. The crisis now is one where you can neither buy food nor grow food."

This is almost entirely a man-made crisis, created by President Robert Mugabe's government, and his administration stands accused of having done nothing to help."

There are lessons in this, for all of us. The sooner we recognize them, the better. By the way, where are the Zimbabwe residents who are bartering small gold coins among themselves for that last drop of water or morsel of bread? Which newsletter writer is brave enough to step forward and propose that the next stop for the rest of the world is the state of affairs we now see in Zimbabwe? Let's hear it. Louder, please.

The $700 level did not offer much opposition, but a rally from current levels is very much overdue. Alas, the Liquid - ation. Capping the morning's news, reports of a 50% drop in Indian festive season gold sales. Someone had wondered what rising premia would do to gold sales in India and expected a mega-surge. Say no more. Know what I mean? Say no more. Topper of the day? Greenspan's admission that there was a multi-trillion dollar fly in his economic model ointment. Oops. Say no more.

Hasta Manana,

Jon Nadler

Senior Analyst
Kitco Bullion Dealers Montreal



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