Listening in on gold bugs gives clear signal that
In restaurants and clubs near Threadneedle Street in the City of London, men meet and whisper about the big buyers and sellers of the day; in Zurich, still other men confide to one another on the Bahnhofstrasse; and in New York city it's at such places as Michael I or Michael II. In all of the conversations, the subject is gold.
Always the same questions are asked: Who were the big buyers and sellers? Where will the price be tomorrow? What are the Russians doing?
One man who has been traveling this gold circuit, listening to the whispers, is Ted J. Veenendaal, whose company, Ofir, is about to mint a gold coin for a country that wants to have $250 million of its currency in gold. (Until the deal is as good as . . . well, you know what, Mr. veenendaal doesn't want to name the country.) What he hears is . . . wait a minute. Before we say what Mr. Veenendaal is hearing, let's talk about what gold is actually doing.
At the close of business on Friday, the price stood at $619.75 per troy ounce in London. This is down from the high of $850 per troy ounce, set at the end of January, but up from the low of $583 set about six weeks ago. Recently, prices have been fluctuating between $600 ounce and $650 an ounce.
Now, back to Mr. Veenendaal. In London he hears . . . wait a second, it's important to know that trading in gold futures (promises to buy or sell gold at a fixed price sometime in the future) has gotten so big that the Comex commodity exchange in New York has established higher margins on gold futures. Futures trading got sort of a tarnished reputation when the Hunts decided to default on a bunch of silver contracts they owned. It took a while for the commodities markets to sort themselves out, but since then, everything is back to its normal level of chaos.
Also, we might mention that the high price of gold has not made friends with US jewelers and dentists. The price is making it tough to sell bracelets and increasing the theft of gold chain necklaces. As for the dentists, they would love to fill teeth with something cheaper. One chap claimed to have invented a substance that had all the same qualities of gold and was made from copper, a fairly common mineral. Its only problem was that it is red. You know, the boys and girls at the office will call you "good old red mouth."
Well, as the chaps in London were saying the other day when Mr. V. was there, the price has no where to go but . . . oops, I almost forgot to mention that Mr. Veenendaal's company has had no problem selling gold flatwear despite, the rising gold price. Right now, in fact, he's waiting to sell a place setting for 12 for $1,998,000 (including serving utensils). The thing that makes this place setting special, aside from the fact that it requires you to hire a Pinkerton's guard to watch over your dinner guests, is the fact that it won't bend. Most gold is malleable. It may be valuable but it's soft. Offir has a patent on a process that makes gold hard while not lowering its purity. How does that work? Well, that's a different story.
It took Mr. Veenendaal three days of hard whispering in London to find out that he should be in Zurich. In Zurich, the London gold traders assured him, he would be able to confirm what he heard in London.And what did he hear in London? He heard that Harrods had stopped serving tea. Oh, you knew that. He also heard that the Russians were building submarines out of titanium and were buying silver like crazy. But what about gold? Are the Russians selling? Move a little bit closer to the page . . . is someone reading over your shoulder? Maybe you should put this away until it's safe to read. The Russians, the London traders said are . . . on the Polish border. Yes, this makes the London traders edgy. Very anxious. More anxious than the Iranian-Iraqi war makes them.
In Zurich, Mr. veenendaal found the Swiss full of stories about gold. But which stories should you believe? The Swiss are all well known for their ability to throw a smart bloodhound off a warm scent. Some traders said investors from the Middle East were selling gold. In fact, just the other day Swiss Bancorporation told its clients that the buyers of dollars. But in the dark corners of the Vaultenstrasse, Mr. Veenendaal heard that the sheikhs were buyingm gold. Just in the last 10 days they were buying gold even though interest rates were rising in the US.
Could this Swiss story be full of holes? "In Switzerland," Mr. Veenendaal sighs, "you hear 500 rumors and two facts." Maybe the wise men of Wall Street would know, the Dutchman reasoned.
On Wall Street, he found more talk about the Dow Jones industrial average going to the 1,500 level than he did about gold. He had to take his gold coin out of his vest pocket regularly to make sure he still believed in the metal, after listening to Wall Street's wizards.A lot of the professional traders acted as if they were hard to hearing when he mentioned gold. "Oh, yes," they said, "it's cold outside, isn't it." They had bought gold at $720 an ounce, Mr. Veenendaal mumbled.
After 10 days in New York, 2 days in Zurich, and 3 days in London, he was finally able to come to a conclusion about gold. Gold will go up until January, when it will peak at between $780 and $825 an ounce. Then it will fall through May and June to possibly $475. No matter that the South Africans are selling less, the Russians are buying silver, or the price of oil is heading for $50 a barrel. Who needs gold when interest rates are at 20 percent?
"Please dump 500 kilos of titanium in my backyard." Sounds ridiculous, right? But James Sinclair, who publishes a newsletter, is advising his clients to sell some of their gold hoards and take up "strategic" minerals. "Ask yourself the question," he wrote in a recent number: "What will the price of a stategic metal be if none is available?"
For those with ample backyards, barbed-wire fences, and lots of cash, Mr. Sinclair says, the following minerals are ripe for hoarding: antimony in 5-ton lots, 99.6 purity; chromium in 1-metric-ton lots in the form of lumps; cobalt at 250 kilos and 99.6 purity; germanium at 20 kilos in ingots at 99.99 purity; electromanganese at 100 metric tons; titanium at 500 kilos and 99.6 purity; and rhodium at 20 troy ounces with a 99.9 purity. If you don't have the right sort of backyard, Mr. Sinclair has information on proper warehousing, insurance, sampling certificates, assayers' reports, etc.
The Dow Jones industrial average backed away from the 1,000 level early last week, but recovered some Wednesday and Friday to close at 993.34. Profit taking , combined with rising interest rates, helped to pull the average down. At the end of the week the prime interest rate had risen to 17 3/4 percent, making it expensive to borrow to buy stocks. Oil stocks, which had been strong the previous week, were off early last week as investors mulled over the effect of higher British taxes on the major companies with operations in the North Sea. On Friday, however, the broad averages for the New York Stock Exchange, the American Stock Exchange, and the over-the-counter market set record highs despite the high interest rates. Many people believe the rates are about to peak. And energy stocks did better.
A spectacular loser last week was KG Technologies. Penn Central called off a merger with the company because of insufficient time to obtain and evaluate data on the MGM Grand Hotel fire and possible financial exposure at one of the GK subsidiaries.