Hello,

I know this is a Y2K discussion site, but with all the numerous threads dealing with Gold, and the Y2K factor in the Gold market I felt that this forum might just find this useful for folks not familiar with some of the really key elements involved in the COMEX Gold Market.

The following is simply the musings of a retired Precious Metals Trader/Broker for those of you who've not followed the Gold Markets and are thinking that Y2K is going to send Gold to $2,000 an ounce tomorrow or the next day. The following is NOT meant as investment advice but rather to provide some background perspective for those contemplating investing in Gold for Y2K or sheer "greed" factors. Yes we all have that "greed" factor in us, even myself. At the end of this general introduction to the Gold Market, you will find a section where I share my 2 cents worth of experience in analyzing this current Gold market. I thought some of you might find a little bit of value in it, but perhaps not much.

I do not direct this material to those who already veteran traders of Gold, such as Andy or Count Vronsky. Although the final section regarding "technical analysis" may be of interest to even veteran traders and brokers. I direct this to you who have only recently become exposed to the possibilities of trading in Gold or buying physical gold bullion and are concerned about the price directions.

Allow me to introduce my background. I'm a "retired" precious metals broker/trader. I no longer trade the markets but I do follow them from a distance. For several years now, I've been bearish on the metals from a technical standpoint but fundamentally bullish. I was around to see the beginning of Gold trading and the runups in all the precious metals during the Hunt Brothers run for the silver. I was there when the glittering metals sunk into the mire during the 1980s and watched it languish during the 1990s. Now, as Y2K looms before us, I've discovered this website and have watched the sudden increase in threads discussing gold. Many of you are extremely bullish. I don't want to "knock" those of you who are bullish. I only want to provide some modicum of rationality by injecting some sound perspective from someone who has played "both sides of the fence" in these markets. I hope to share some keen insights that might be of benefit to those of you interested in wading through this material that proceeds hereafter. This information may help you to better understand why the markets are moving and what to anticipate in the days and weeks ahead. With that in mind let me begin with a comprehensive overview for the beginners before proceeding to a technical analysis of the markets.

MARKETS IN GENERAL:

Market prices for gold or any other commodity or stock do not move straight up. Period. Yes, we all know that. But right now, many of you are posting as if Gold is going straight up to $400, $500, $1,000 or even $2,000 an ounce. This attitude could be self-defeating and demoralizing to a beginner when it later becomes clear that markets just don't move this way. It is indeed very possible right now to see us back at the $300 gold level again before it reaches $400. Irrational exuberance should be tempered with reality. The markets exhibit over-exuberance all the time in one direction or another. Right now, Gold is getting its first taste of real exuberance in about 15 years. It's exciting to see even for an old geezer like myself.

The Gold Market prices are fueled not by folks going to their neighborhood gold dealer or banker but rather by the COMEX at the New York Mercantile Exchange. This market provides something called Futures Contracts for buyers and sellers of gold to meet and conduct a business transaction. Futures contracts are vastly different and little understood by the average citizen, so allow me to explain how these investment instruments work in a way the average layman might better understand. In doing so, it will help the "newbie" to better understand why gold pricing acts as it does.

Trading in Futures Contracts:

Gold is traded in both physical cash deliveries and also on futures contracts in which a buyer and seller agree to conduct a transaction for delivery in a specified future month of time. The current "cash" or "spot" price of gold is based on active trading months. Trading and delivery occurs in Gold in the months of February, April, June, August, October and December contract months. These months are where most trading in Gold contracts are actually made. Very little trading action transpires during the odd months. Right now as October begins, the October contract trading becomes the "spot" market pricing. In August, it was the spot month. August of 2000 will be the spot month again at that time but for now it is simply considered an outside delivery month. At this writing, in early October, the heaviest trading volume for Gold is in the December, 1999 contract month. This is where most of the action is and therefore, for now, it is the real month to "watch out for." As December roles around, traders will role out of their December contracts and move into February, 2000 contracts and then it will become the dominant power month. The cycle then continues as time passes on to new months. Even now, February, 2000 is growing in its price action as more traders seek to role into that month's trading.

For newbies and novices... remember, these active months are where the power derives that sets price action for gold (in most cases, nearly all the time.) Only in an extreme crisis will spot month action supersede the closest even power-trading month.

In other threads, I've noticed comments from "newbies" complaining about why the market price goes up much better in the Asian markets than in New York trading. The reason is simple. There's more business conducted in New York including more players trading short term. We call them "day traders." These folks are looking to make a quick buck and get out. They're constantly buying and selling. That helps add extra liquidity when markets might otherwise slowdown to a crawl. In the Asian markets you tend to find more investors simply looking at longer term positions, and thus we tend to see more buying interest longer term than shorter term. This helps to foster the notion that Asia just buys. But in reality, it just seems that they are only buyers. They DO sell also. You can't have a buyer without a seller, even in Asia. In the biz, we used to joke about Asia taking the market up so 'we' in New York could take it back down the next day. It just seemed that way, but in reality it all evened out.

A Brief History of Gold Trading: Not since 1985 has gold seen lows of $265 an ounce. It jumped back then because of a perceived banking crisis as some State-chartered banks folded in Ohio, Maryland and a couple of other states. This perceived crisis sparked a real rally in the metals that took it briefly back up to near the $500 per oz. range over a 2 and one half year period peaking in Dec of 87. This was the last time that the Gold market saw $500 gold. Prior to this, the summer of 1982 saw a similar run to the $500 mark during another banking scare. In 1982 is was the near default by Mexico on bank loans to major US banks. This runup came on the heels of the super blow out of 1980 when Gold ran up to over $850 per oz in sympathy with silver as a result of the Hunt brothers attempt to corner the silver market. Gold was NOT the leader during that run up. Gold largest run up moving on its own fundamentals is $500 an ounce. That is a FACT. It has only happened twice in the nearly 25 year history of Gold commodities trading. During the decade of the 1990s, Gold has barely traded above $400 and then only for very, very brief periods of time. In fact in the 25 year history of COMEX gold trading, gold has traded consistently above the $400 an ounce range for only a little more than 5 years out of the 25 year history of COMEX trading. Now, I'm hoping that this information will sober some of your wild enthusiasm because over exuberance can "kill" an investor's wealth quickly. But, don't lose heart. I'm not trying to "rain on a parade." There IS reason for optimism. But in that optimism its good to know where the market has been in the past.

Understanding Commodities Market Trading in Gold

Any market, whether Gold, Soybeans, Pork bellies or Crude oil has a couple of key components in how investors relate to a given market. There are two approaches or schools of thought to such investing philosophies. (Also applies to stocks and bonds as well)

1. Fundamentalist Philosophy 2. Technical or a Technician's Philosophy

Let me define those terms in layman's language for beginners.

A fundamentalist (in terms of investments) is not a term denoting a religious view. It refers to an approach by some investors that examines all relevant factors affecting the price of a commodity in order to determine the intrinsic value of that commodity. (In this case, gold.) The Fundamentalist Investor concentrates his analysis on the economic forces of supply and demand that causes prices to move higher, lower, or stay the same. The intrinsic value is what the fundamentals indicate a commodity (gold) is actually worth based upon the law of supply and demand. If this intrinsic value is under the current market price, then the commodity is overpriced and should be sold. If the market price is below the intrinsic value, then the market is undervalued and should be bought.

The Technical Investor (or "technician") concentrates on the study of market action itself. Technical analysis is the study of market action, utilizing the use of price charts for the purpose of forecasting future price "trends." The Technician focuses on 3 aspects of market action.

1. price, 2. volume 3. open interest

Technicians usually rely upon 2 key tools to analyze price action. Price charts (including volume and open interest) and various assessment gauges such as trend lines, moving averages, parabolics, rates of price changes, Fibonacci theory or "oscillators" such as "stochastics" "Directional Movement Index" "Commodity Channel Index" "Relative Strength Index" and various other mathematical indexes that gauge a market's strength.

John Murphy in his textbook of Technical Analysis of the Futures Markets (ISBN: 0-13-898008-X) tells us that there are 3 premises on which the technical approach is based:

1. Market action discounts everything. 2. Prices move in trends. 3. History repeats itself.

Now, remember this folks. Most futures traders (those trading futures contracts, not options) classify themselves as either technicians or fundamentalists. Now granted there is a fair amount of overlap with many fundamentalists giving some credence to technical considerations, and technicians generally pay a little attention once in a while to major fundamental factors.

One thing should be said however about both of these views. Charts and fundamentals often times seem to be in conflict with each other. This is because market prices act as a leading indicator of the fundamentals or the conventional wisdom of the moment. Technicals generally lead the markets but the fundamentals are the underlying driving force for that market.

I have a rather unique view in these matters. Most traders and brokers are either technicianss or a fundamentalists in how they view the market's actions. I happen to be both at the same time. Yes, it is rather schizophrenic. But I happen to have recognized early on that technicals are the force that leads or guides while the fundamentals are the underlying power train or engine. You can't have one without the other. Therefore, an investor is most likely at a great disadvantage until he recognizes this fact.

GOLD MARKET COMEX ANALYSIS:

Fundamental Analysis:

Most of you already know the fundamentals of the current gold market. Y2K is an underlying fundamental factor. Another is that at the recent price levels gold has been selling at prices that are underneath the cost to mine the raw gold and bring it to market. Therefore, new supply production has been shrinking at a time when Y2K worries and low prices have stimulated demand. Another, most recently revealed aspect is the "short-playing" of the market by brokerage houses, producers and central bankers who've gone overboard in short-selling the market downward in an attempt to drive gold to as low a price level as possible. It would seem that the goal was to perhaps drive the price back down to $35.00 per oz. Certainly the goal seemed to be to get it down to the $200 to $215.00 range. In doing so, this activity created such a lopsided imbalance in unfilled orders that now there is a sudden "panic" when buying activity demanded physical possession and not simply paper trading profits. Suddenly folks didn't want to turn around and sell back their gold and take profits instead of taking possession. No, this time, they wanted to buy and take possession. It didn't take long for the realization to take hold that there's not enough actual gold available as "promised." Thus, we have a paper shortage of gold in the Comex. This is the main underlying "supply-demand" factor weighing on the markets. Many if not most of you already know this but there might be some who don't actually know or under stand it in simple terms. This folks is what makes up the basic fundamentals right now of the Gold market. There's are other issues, but the above are the current main fundamentals powering this gold market.

TECHNICAL ANALYSIS:

TFC Commodity Charts:

If you're a newbie to gold trading... For an example of what a bar chart of pricing looks like see the link below. The greenish yellow vertical lines are each day's price line movement ranges. The white and red lines of dots are showing 21 day and 50 day moving and averages. The box underneath with the lettes RSI on the left corner indicates the Relative Strenght Index for Gold. This chart, btw, is for December 99 Gold.

http://forex.freeservers.com/main2.html

Historic Charts: Let's look at the Historic Price Charts first. The historic price chart provides price action in bar chart format for every month that Gold has traded on the Comex. This goes all the way back to the start of trading in 1975. The chart shows the big run-up in late 1979 and early 1980 and then the general wandering back down of pricing for the following 20 years or so. From this chart we see a long-term historical resistance line forming at the top of the 1980 price peak and extending to the top of pricing at the start of 1996. This line then extends to our current price/time area in the price range of about $300-$315 per ounce. This price range then becomes extreme "resistance" for the current market to push through. Once penetrated for 3 days or longer on daily charts or in this case for 2/3 months it becomes "strong support." Further straight resistance lines are at $400 and $500 price levels. All 3 of these areas have strong and powerful resistance/support for the current market to push through or bounce up from. These lines are historical in power and significance." Expect heavy selling at the $400/$500 price levels, enough to knock back a normal rally for some time. All of this is Historical support/resistance basis.

Chart patterns. We saw a "head & shoulders" formation during the 1979-1982 period of pricing. Since then no real significant pattern formations stand out, except that the recent price actions in late Sept. broke through a minor resistance level and is poised to move and challenge the initial long-term resistance level of $340-$350.

Oscillators:

The main oscillator I utilize is the DMI oscillater with ADX. This oscillator is on the verge of signalling a radical shift in historic trends on gold pricing. We are looking at the potential for a very significant long term trend shift. The trend has been long term downtrend that has lasted for nearly 20 years. That is apparently now about to change if pricing can remain or exceed current levels for the next couple of years. If so, it could mean a long-term bullish trend that might well last 20 years. Certainly at least a couple of years seems likely.

Conclusions: It appears that Gold may well go through the roof as the historical chart shows a very bullish bias for the metal as long as the rally doesn't move up too quick or too fast.

Weekly Charts for December 1999 Gold

We see on the Dec. 1999 Gold price charts that the recent action of broke through resistance at $290. This now becomes a support level for the December 99 Gold contract. There is still some "minor" resist ance at the $330-$340 level, again at $400 and also $460 on a Weekly chart basis for Dec. 1999 gold.

Chart Patterns:

The actions of the last 2 weeks and now starting a third weekly bar in the Dec 99 bar chart indicates that a pole is forming with which to hoist either a "flag" or a "pennant." If this is indeed the case, then we are seeing a signal that the pricing at the "flag" or "penant" level is about half way of the current price run. That would mean further continuance of prices climbing to about the $370 level. Such a move would put Dec. Gold into position of testing the resistance levels near the $400 level and perhaps fairly soon.

Another chart symbol that is now evident is what we call the "island reversal." This is a series of "islands" of pricing bars in the chart in which there is a gap between the group of price bars and that means sudden surges in trading. Such a chart format is confirming that the downward trend is over and that the market is reversing itsel and going to a "rally."

Oscillators:

The DMI/ADX oscillator is giving us a fairly strong "buy" signal. This came as the price cleared the $270- $280 price level a couple of weeks ago. It remains a strong signal even now at $50.00 higher.

There are about 8 or 9 other oscillators showing similar bulllish optimism but some are indicating that the price runs have been too much, too fast and may be "over bought" temporarily. It could mean that a short term price "correction" may occur. However, the chart patterns in the bars themselves indicate that the "flagpole" may still be forming. If so, it will manifest another element in the pole this week and could mean an expansion of the current price movement range. It could also indicate another 2 to 4 weeks of "trading range action between $300 and $330 (basis, Dec 99 gold).

These aspects all point to a bullish scenario that has not yet run its course on the intermediate term.

Daily Charts

Looks like this chart is showing a strong breakout.

Chart Patterns:

Again we see the "flag" formation developing. The 9/28/99 price action (as well as 9/27/99) shows the formation of the "pole" for hanging out the subsequent days of trading in a much narrower range of price movement. This formation appears to be breaking out to the upside with the Asian early morning trading of Tuesday 10/5/99. This would tend to suggest that the flag itself has formed as much as it will.

Keep in mind that the "spot" month of October is showing even with the Tuesday morning action in Asia the retention of the "penant" on the flagpole. This would tend to suggest a few more days of trading in that contract between $298 and $315 with the range shrinking each day until the upside breakout is made. However, because it is a spot month, the breakout could arriver prematurely. IF it breaks out prematurely, this would be a possible warning signal that the rally may fizzle before it can reach $400.

Oscillators:

The main oscillators show strong buying signals. The DMI/ADX signalled a buy at $255-$260 per oz. on 9/21/99 ... a week before the big breakout move of 9/28/99. The DMI/ADX continues to show a fairly wide open buy, BUT, it is also showing signs of buying weakness since last Thursday. This key indicator has an almost flawless track record and the current weakness should be viewed with concern, but by no means is it indicating that the current run up is over. Indeed, the chartist formations themselves strongly suggest a continuation but underscores the need for a few days more of rest.

GENERAL OBSERVATIONS:

The market is apparently making an historical move perhaps not seen in the 25 year history of the COMEX. The historical charts would tentatively seem to suggest this although it will take 2 to 3 years of more price action to the upside to confirm a 10 or 20 year trend might be setting into place. The weekly charts also tend to suggest that the bear market has finally ended for Gold. The daily charts definitely are showing that in the short term, a market rally is underway and we may already be halfway up to the top, or its the beginning of a very long move. The Weekly's and the historical would seem to confirm a much longer upside play is in the works.

The market has moved too far too fast to be healthy for further upside movement. It needs time to rest for a few days. I fear that further bursts of upward price movement today and tomorrow will harm the technical factors, distort the formations in the charts and bring this market back down prematurely. Therefore, all of those "bulls" out there should be patient. These chart formations can either make or break a market...or rather, I should say that they are the genuine tell tale indicators of the "real" direction of the market on the near term and operate independently of fundamentals. I've seen more rallies stalled and broken by bad technical patterns that develope which tells us that the rallies were never what the fundamentalists seemed them to be. In light of this aspect the next paragraph needs to be stated.

THIS MARKET IS NOT, NOT GOING TO THE MOON anytime soon. But it does have a half way decent shot at testing the $400 resistance level sometime in the next 30 days. When it does, expect a one-third to one-half retracement before retesting the $400 level. It may take 3 attempts at a run to $400 before it breaks through. If not done by the third try, it could tread water in a trading range with support running between $290 and $315 for a while.

While it is a little far off to speculate about pricing during November and December, and considering that there are a lot of variables on the fundamentals side yet to be played out. It is not likely that you will see gold crack over the $500 level this year. Barring a major crisis of some sort, it will be fortunate to crack over and hold at $400. I say this because, I have doubts that the market is still all that strong. The exception would be a sudden Y2K panic attack by much of the population. But somehow, I don't see that as happening.

I suspect that a big reason for this latest upside movement has simply been "shortcovering" by the brokerage houses/forward producers in their attempt to run for cover. IF so, it may be that the bulk of their urgency has passed for now, but more margin calls may have yet to be called, especially if Dec gold pushes over $330 in the next day or so. Such movement may prompt more margin calls in New York on Tuesday or Wednesday. IF so, this could provide a swift move up to finish the flag formation at about the $370.00 level. I do suspect that if such occurs you will then see retracement fairly quickly as some temporary longs are liquidated to await the clearing of the smoke and dust before determining the next move.

Now, having said all of that, let me say that I'm aware of the rumors that George Soros is buying up physical metal for possession. But I'm not so sure that he's been buying the last few days. The 9/28 trading day (last Tuesday) may have had him trading heavily, but I'm not convinced he's been in the market in any kind of major way since that day.

CONCLUSIONS:

Gold is NOT going to the moon just yet, but be patient...this is the first positive move in a new bull market that will last perhaps 2 to 3 years or maybe longer. Who knows, it may last for 10 or 20 years. Then again, the government might just outlaw the ownership of gold within the next 6 months.

WORDS OF WISDOM:

If you're speculating in futures contracts... hold on tight, the ride is about to get wild. If you're just doing physical holdings, don't expect a chance to buy gold below $300. Its just probably not going to be there anymore, and won't likely be back there anytime soon, (if ever, Robert Prechter and his Elliott Wave notwithstanding--and that theory has been essentially repudiated by most technicians). IF you're an options trader, good luck you'll need it. Generally speaking the only folks making money on options are the brokers. Options are easy to get into but much harder to get out of and actually make any money. In fact, I've never actually met or shaken hands with a retail buyer of gold/silver/platinum options. It's a rare event. I've known brokers who traded their own options and made money in the metals, but that's about all. I've known brokers and retail customers who made money in options in other markets but not the metals.

I hope this little essay has been of some help to those folks new to the Gold Markets and will at least give a little extra understanding. If this essay has been of some benefit to you feel free to let me know here or at my mailbox.

Oh, one final thing. I'm done with trading. I'm out of the picture, so I don't stand to gain or lose anything by what I say here. I'm simply trying to do a neighborly favor to those interested in different perspective and trying to figure it all out.

-- Dick Moody (dickmoody@yahoo.com), October 05, 1999

Answers

Dick:

Thanks very much for your insights, and I hope to see more of your commentary as the gold market continues to get our attention.

I'm hoping you would share some of your more successful technical indicators that have served you well in the metal markets, and other commodities/financials as well. Are there some indicators that appear to work better in certain markets, and are there indicators that do a good job in all markets?

Thanks,

Roger Altman

-- Dr. Roger Altman (rogaltman@aol.com), October 05, 1999.

Roger,

Thanks, and yes. I mentioned it fleetingly in the above piece, but I've got one favorite. It is the Directional Movement Index...or "Wilders DMI" as its sometimes referred to. It's very complicated to understand but it includes 3 main oscillator lines. A D+ and a D- line (advance and decline lines) plus a third line that functions more like a parabolic. The idea is that when the D+ and D- cross in and invert in the channel's lower range (between 0 and 25) and then the top line (whichever one it is) crosses over 25 to 30 this creates a signal. If the third line (parabolic) follows upwards then you have your confirmation. Likewise, when it reached the top of the channel begin to look around for other signs of toppiness. Usually you'll see this in the actual chart formations themselves, like "island reversals" where you see gaps in the price bars on the chart. Also wedge formations, and of course, "flags and penants" just to name a few.

I also kinda like Lane's slow and fast stochastics, commodity channel index and also the Relative Strength Index. I wouldn't use any of these by themselves, but rather together as confirmation that a buy signal is near or now underway. Likewise RSI will give better direction as to when it may be time to bail out of a position with a profit. There are some very good Technical Analysis books out there. The best I've seen, though my version is a little outdated, but it may have since been updated is the textbook by John J Murphy: "Technical Analysis of the Futures Markets: A comprehensive guide to trading methods and applications." My edition was updated in 1986 and published by New York Institute of Finance -- a Prentice Hall Co. John has been a CFTA and also a consultant. He's also served as Senior Technical Editor for the Commodity Research Bureau's "CRB Futures Chart Service" and the chief writer of its highly regarded "Technical Comments" page. He also served on the Board of Directors of the Market Technicians Association. He has very high credentials and has a sterling reputation. His textbook covers it all, from analyzing charts to various theories to spotting and plotting trends and trendlines, moving averages, parabolics, and a variety of oscillators. It's a fairly steep price on the book but well worth it for those who do want to understand technical analysis. Its over 500 pages in hardback at about $50 back in the late 1980s. I don't know if its still in print or not but check with Amazon.com or Barnes & Noble. If its still out there, I'm sure that they can order it for anyone who wants it.

Hope that helped and thanks for your input. I was afraid maybe I was wasting my time or preaching to the choir. I just figured that the post might be of help to a few folks new to the glittering gold game.

-- Dick Moody (dickmoody@yahoo.com), October 05, 1999.

For the latest gold prices, click one of the links below:

• http://www.kitco.com/gold. graph.html
• http://mrci.com/qpnight.htm

Sincerely,
Stan Faryna

Got 14 days of preps? If not, get started now. Click here.

Click here and check out the TB2000 preparation forum.

-- Stan Faryna (faryna@groupmail.com), October 05, 1999.

This is a sophisticated troll by a short shill.

His intended message is: PLEASE PLEASE DON'T BUY DISTANT OUT OF THE MONEY CALL OPTIONS ON THE COMEX !!!

-- Norman D. Culver (ndc@alum.mit.edu), October 05, 1999.

Dick gold is about to break through $340. right now. If this is short covering, this rally may take several days, maybe even weeks to slow down. I think we will see $400. gold sooner rather than later.

-- Bill (y2khippo@yahoo.com), October 05, 1999.

Dick:

I've read more technical analysis books than text books in my own field (metallurgical engineering), so I probably won't be adding any more until the Y2k smoke clears (if it ever does). I did, however, want to get your input with regard to YOUR OWN experience with USEFUL technical indicators.

Thanks again for sharing that,

Roger

-- Dr. Roger Altman (rogaltman@aol.com), October 05, 1999.

Dick Moody:

Thank you for the perspective and insight and the benefit of your trading experience.

In re future price action of gold and reference to historical support / resistance, can we count on the stability of the dollar that is the foundation for this perspective?

My suspicion is no and would like to know your assessment.

Your reference to possible regulation of ownership is noted and relevant, but my question is the future of dollar stability and the contention that it is an unknown variable.

My position is the dollar has been backed during the past twenty five year timeframe by the full faith and might of the US military, but the trend is down since 1992 in re the value of that collateral.

Thanks,

-- Tom Beckner (tbeckner@xout.erols.com), October 05, 1999.

Dick - what's your opinion on platinum? Will it rise along with gold? Can it be confiscated?

-- William (@ .), October 05, 1999.

Dick,

Thanks for your insight. I think, however, you are wrong. You are basing your understanding on recent history of how markets operate. This time, however, a number of things have come together to potentially have a accelerant affect that hasn't been seen in my lifetime.

* Bullion banks and hedge funds sold gold short to levels never seen before (adjusted for inflation).

* Y2K is going to cause the revaluation of ALL financial assets over a very short time, with many going to 0.

* We have a stock market bubble about to be pricked. Normally after a equity mania ends, there is a mania in hard currencies.

* We are in the beginning of a currency war between the US$, Japanese Yen and European Euro. This has to be played out in hard assets (gold) not pieces of paper with signatures.

I am convinced that the fall in the price of gold from ~300 to ~250 over the last year was market manipulation to allow big players to accumulate gold cheap for the currency war. This is going to be very interesting. Now, we are entering end game IMHO.

-- ng (cantprovideemail@none.com), October 05, 1999.

Dick, thank you for the useful tutorial. I am sitting out this one as I figured I am a few months late in learning about the ends and outs of commodities in general--gold in particular. Having personally learned the hard way about buying high and selling low, I hope some of the other readers are not betting the rent money on this issue.

I continue to be astounded at the skills of the people posting on this forum Thanks!

-- Nancy (wellsnl@hotmail.com), October 05, 1999.

Dick,

Thanks for your primer on gold trading and the market. But I was wondering, since you mentioned the connection of gold price rising in conjuction with bank problems, how you see this situation for right now? For instance, I read where there are some large banks as well as large hedge funds that are deeply shorted on gold. This could conceivably lead to failures as demands for the metal increase and short positions can not be covered. Would that not be on a high probability list of things to come in the near term? What about the bailout of LTCM, to protect the entire financial foundation, as a serious indicator of the government's concern for the fragility of financial markets right now? What about BoE entering the game with their phony selloff announcement of gold in an apparent attempt to keep the price down to where the large short positions could continue to survive? Doesn't the current bust out of gold price put a lot of these big traders and leasers in trouble? Trouble enough to cause some alarming failures, similar to the Savings and Loan debacle a few years back. Lastly, won't the peceived Y2k threats to the world financial community create a steady move toward gold as a hedge? The average guy on the street may not be paying much attention to Y2k, but I presume some very savvy bankers are, starting with the Euro bankers who backed off on further gold sales. Just wondering if these two factors, collapse of big short traders and Y2k induced currency failures, won't continue to drive the gold price in the up direction. Lastly, I also don't think we will see $2,000 oz gold in the next few months, but if the US Fed is forced to inflate our monetary supply next year due to IRS collection failures, then the increasingly worthless paper dollar could easily see an exchange for gold at those levels and beyond. However, I don't have your background or experience in these matters, so any additional thoughts/comments would be appreciated.

-- Gordon (gpconnolly@aol.com), October 05, 1999.

Mr. Moody,

with all due respect Sir, You are simply incorrect in alot of your analysis and statements.

I purchased a gold option two weeks ago for dec. for $120.00 Today That option is valued at $2100.00 Thats right Sir

I am not an experienced trader and do not have much money. With all of the info. that I received on Yourdon forum it seemed like a wise thing to do. (thank andy).

For you to say that you've never met anyone that made money on an option trade. Well guess what you just met one. Please temper your technical knowledge with the reality at hand. All the rules are off my friend, You may want to open your eyes!!!

Respectfully,

-- Harry Butts (dciinc@aol.com), October 05, 1999.

Harry,

So your option is in the money? Try getting that money OUT OF IT in the liquidation. I've known fellows who popped $100 on an option were "in the money for $5,000 to $10,000 and yet when it came time to liquidate, never got a dime.

Moral: "It is much easier to get into a profitable option order than it is to get out of one."

Moral...call me after you've liquidated and then "show me the papers."

It's not an impossibility for a retailer to make money on an option but nearly impossible for a layperson to do it with consistency. I prefer the contracts themselves, thank you. I've met lots of folks who've made money on contracts, myself included. Course, I've also met a lot of folks who lost money on contracts, too.

Frankly, from the tone of your comments, you've got that "I'm invincible, I can win at options" attitude. Very dangerous attitude for an investor to have as it later leads to "dumb" and regretful decisons for most of us. (been there, done that).

Anyway, I hope that you CAN get your money out of that option, (I'm always rooting for the underdog) but don't DON'T think that this is normal. The only normal winners in options trading are the Pro's and the brokers who monitor every second of the market ready to execute a liquidation.

-- Dick Moody (dickmoody@yahoo.com), October 05, 1999.

To Norman,

You called me a "troll?" Simply because I warned people about options?

No, I'm not a troll. I am only stating a genuine reality here. It is very easy to get sucked into placing an option's position. It can even be easy to take such a position and see it develope into a profitable position. But the real factor is getting out of an option position profitably for the average non-pro in a "moving" or very active (read "panicky") market. That becomes a nearly impossible task or so it seems. In reality, though very few average retail customers ever see their options liquidated in the money, and very, very seldom do they do so repeatedly. For those few who do, they have a broker team who's genuinely on the ball and not overworked. Also keep in mind that options trading in the metals is a whole different ballgame than in stock options. Oh, and also, there are a lot of fast-talking brokers out there who want and need your money and they'll tell you what you want to hear to get it. (not all brokers, just the fast talkers)

The final score on this is that you don't know what options trading in the metals are all about. So you should save your powder or stick to stock options which are only slightly less dangerous.

-- Dick Moody (dickmoody@yahoo.com), October 05, 1999.

Hi Dick,

Your primer at least looked useful. I did not read it all.

As freddie the freeloader might say, it's not that I expect to be able to do this on a regular basis, but forecasting what will happen to financial markets with respect to Y2K is a lead-pipe cinch.

Stocks will tank. Gold will rise. Bonds could go either way, although I'd bet they tank as well.

The key factor is uncertainty. If you can figure out how given markets respond to uncertainty, you can figure out which way they will move as the level of uncertainty rises from here on out.

-- nothere nothere (notherethere@hotmail.com), October 05, 1999.

To Bill who said:

"Dick gold is about to break through $340. right now. If this is short covering, this rally may take several days, maybe even weeks to slow down. I think we will see $400. gold sooner rather than later."

What month of trading are you referring to Bill? If your looking at the October 99 Comex contract, we're a little ways off from that level today, as the hi was only $327.50. If your looking at Dec 99 Gold Comex the hi briefly touched up to $339.00 in the early NY session. Market had trouble initially breaking back thru 335. Then in about a half hour after the M/Opens the big run comes and falls short repeatedly at $338. It backs off for about 5 minutes and then breaks up to $339.00 and hammers that price point repeatedly and then the steam runs out. Why? A lot of short-term Longs in the market took some profits that may have been entered when the market was down about $290 to $315. For these day traders and short term traders that amounts to "healthy" profits on their investments. $340 is seen as a strong resistance level, therefore a lot of folks will lock in profits just below that level when they see no steam to penetrate. This is why Gold didn't break through $340 today. Instead she finished near the NY Session's lows of the day. (I'm not counting the overnite action of the Asian markets --old history,now). Market here is catching its breath. This movement in the past two weeks has been a substantial run up. It could use a couple of weeks of breath catching to keep the thing healthy from a "chartists" standpoint. December 99's chart is looking pretty raggedy here to me. Unless, there is some shocking shoe left to drop in Gold and the "shorts" scandal and the situation is still far from resolved, then things should begin to settle down. Right now, the rumors of further blood to be let from shorting broker-houses is just that, RUMOR, and unsubstantiated rumor. Nothing to hang your hat on, nor prove in a court of law with the current evidence we have. Therefore, keep it vaguely in mind and realize that the technicals are now "bullish." Also remember, $400 is a very serious resistance level and will require "nuclear-power" to blast thru. $340 is looking pretty strong.

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Dr. Roger,

Well, your question: "I did, however, want to get your input with regard to YOUR OWN experience with USEFUL technical indicators."

I guess, I didn't really answer it as well as I should/could have perhaps. I've had good success with the Wilder's Directional Movement Index with ADX line. But you've got to understand it and how it works and what the signals are. Check your technical trading manuals for details on this little known/little used tool. It is an Oscillator-type of tool. Keep in mind though that it is just one of many tools and its best to use it in conjunction with slow stochastics and the RSI or Relative Strength Index. THEN also, I use and pay close attention to actual bar chart formations and whether or not they confirm or validate the oscillator tools. I also pay attention to fundamental issues as the underlying basis. My experience with these tools has been good as long as I remain patient and follow the rules.

The DMI works well in my experience with all the metals, and Crude Oil. It doesn't not necessarily work well with Treasuries or Stock Indexes except the DJIA when it does a little better. The DMI does fairly well with the more active ag markets like Soybeans, Wheat and Bellies when those markets are rolling. I hope that better answers your question. I can't get too detailed though as this medium of communication is somewhat limiting. Keep in mind that the biggest obstacle in trading is "emotions."

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Tom B.

You asked: "In re future price action of gold and reference to historical support / resistance, can we count on the stability of the dollar that is the foundation for this perspective?"

Answer: For the moment, I think that we can. In January, everything is up in the air. I see no major assaults on the $$$ that would affect Gold trading before rollover time.

In looking at the currencies themselves versus the dollar, The German Mark is in a "bear market" in relation to $$$. The Japanese Yen maybe be rebounding a little more but it is by no means in any shape to give challenge to the $$$ pre-eminence. The Eurodollar is in a real bear market. Factor in Y2k and these countries are in far worse shape than the USA. This is why the dollar remains "strong" relatively speaking. Yes, its all a shell game with smoke and mirrors but they have the guns to make us all play along.

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William,

You asked my assessment of Platinum. Bullish. Very similar to Gold, and probably a little better!!!! Because it reacts more quickly. Technically in the charts, Platinum's patterns look much healthier for a price run. I expect it will run on up and test the $450 level before the end of the month on the October 99 contract. That means another $50 to $65 move in the next couple or three weeks. It is however, running in sympathy with Gold and it will follow the yellow metal's lead, but it will race ahead of gold in the speed of advancement. It always moves faster than gold.

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NG,

Everyone is entitled to their opinion, and I could be wrong, but so could you. Let's look at your fundamentalist assertions,

" * Bullion banks and hedge funds sold gold short to levels never seen before (adjusted for inflation)."

This is true, but how much of those shorts have already been covered? Rumors have it that there is very little. NEVER TRUST RUMORS WITH YOUR MONEY! You'll get more enjoyment out of your money by lighting a match to it and watching it burn in front of your face than putting it into investments based on "wild rumors." I still suspect that most of the "big boys" (brokerage houses) are now covered up on most of their shorts OR else we'd have seen a LOT, A LOT more bloodletting in the streets last week. In fact, we'd have heard of mass suicides on Wall Street had these current rumors been even halfway close to the truth at this point in time. I'm not a polly on this, just a realist. I've watched these markets for years, and its always "some rumor" that gets blown out of proportion by the ordinary folks out there with gold-fever. The market is bullish, but let's NOT get stupid and accept as fact all of these rumors.

* Y2K may well re-value everything, but in what direction? Too many wild cards out there to know for sure just what will still be afloat. For all you know, Gold might well be outlawed in 6 months.

* Regarding "Currency Wars." The technical charts are NOT showing any such thing. In fact, the Eurodollar is IN THE TANK. So too is the German Deutsche Mark. The Japanese yen has just now halfway recovered from its 10 year fall from grace. Don't listen to too many conspiracy theorists out there, especially in regards to currencies. Now, perhaps if things really turn ugly in Y2K there may some "real" wars going on and that would change the currency landscape perhaps, depending upon the war.

* Gold manipulation? I agree up to a point. Gold has been manipulated but for a lot longer than a year. Try the last 20 years or more but NOT for currency wars. Instead it was to fund treasury deficits by keeping gold low so people would buy treasuries.

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Nancy,

Yes, you're probably very wise to sit this one out. Physical silver though wouldn't be bad if you don't already have some. Perhaps a little gold in coin form.

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Gordon,

As I stated above, I doubt the validity of those rumors as being as massive as claimed as far as being unfulfilled. I suspect of course that there has indeed been manipulation. The problem was serious but I suspect that the situation has stabilized for now. These boys are well connected and will/are being bailed out. I suspect most of the blood has already been spilled. What it did do is re-establish a technical bullish scenario and the folks thinking of serious shorting are going to be thinking twice, real hard before establishing speculative short positions in any massive quantities. They've learned a lesson, for now. The LTCM situation is another separate matter that will weigh over all markets to some degree or other. For now, the smoke and mirrors are heavy enough to keep the mirage going awhile longer. Regarding Central Bank Gold sales. Well, now we have the Swiss reportedly ready to do the same thing. It's called "tag team" selling! :-) How innovative?! These boys still have a lot of tricks up their sleeves. The current price movement did temporarily put many of these folks at risk but the urgent crisis element has temporarily subsided for now. It will probably remain so for awhile. Now, the bullish technical factors can kick into the gold market and it can begin to trade in a more "normal" fashion for awhile. The overall trend for gold is bullish. As I stated in my initial post. That overall trend is now tentatively bullish on a "historical" scale for probably the next couple of years at least if not 10 or 20 years, unless someone changes the rules on gold ownership. Y2K is the real wild card here. No one knows just how much real effect it will have on our lives. Re: IRS? Congress could move swiftly to alter that landscape and move to a national sales tax if needed to recover quickly from any computer mess ups. The bottom line is DON'T underestimate the bag of tricks these boys who are in power have available to pull out rabbits from the hat. Too many of us have underestimated them now for 30 or more years. They're like the energizer bunny, they just keep going and going and going. They'll keep doing that unless Y2K is TEOTWAWKI and if that happens, there won't be a civilization to be having these discussions about anyway. It will simply be a MAD MAX scenario. My bottom line is that these boys will somehow muddle through and make our lives even more miserable than they already have. Expect more of the same, and maybe then some. Scary isn't it?

-- Dick Moody (dickmoody@yahoo.com), October 05, 1999.

Dick,

Thanks for taking all this time and trouble to pass on a few of your own "words of wisdom." Sure, some will disagree with you, but so what? I always like to talk to the scouts, those who have spent many years out in bush, dealing with the natural forces. You strike me as someone who knows their way around in this minefield, and are here to tell about it, to anyone who is seriously interested. I'm paying attention, and I appreciate your offer of these thoughts and tips. There's more than one way to skin a cat, the saying goes. What is important is to listen to anyone who is a pro at it, regardless of the technique they use.

-- Gordon (gpconnolly@aol.com), October 05, 1999.

wow dick very heavy stuff... i read it but is mostly still beyound me. Guess i will stick with my gold wedding band and my coffee cup that sparks in the microwave

-- sandy (rstyree@overland.net), October 05, 1999.

Dick,

Your comment that insinuated that no one makes money in options is wrong. There is thousands of people making a killing right now. I own 36 December 320's that I gave $75.00 each including commission. Right now as I type this they are worth $2100.00 each. So for a little over $2000.00 investment I have turned it into $75,600.00 over the last 7 trading days. I will sell them when gold hits $400.00 for a total return of $288,000.00 return. Thats not chump change.

For all others, options are usually a very risky investment and will contiue to be. But, it does not take a rocket scientist to figure out where gold is going and where the Dow is headed. Right now I'm in the hole with my Dow 7000 puts to the tune of $3150.00. When the Dow tanks around the 14th of this month those same Puts will make me tens of thousands. Do you think the Dow will crash? Is it worth $105.00 to take the chance of making $5000.00? I will buy more Dow 7000 puts in the morning.

Thank You and may Gods Will be done in our lives,

Mike

-- flierdude (nospam@spam.spam), October 05, 1999.

Thanks for the education Dick. I think I will stick with my "metals" bought from - Snap-On, Mac, PROTO etc.... I'm surely one of the guys that would get his pockets picked in your world.

-- dozerdoctor (dozerdoc@yahoo.com), October 05, 1999.

Dick: You are saying that those above who have gold options that have increased greatly, and show a huge paper profit today, would not be able to cash them out tomorrow for that profit (assuming the option price is the same as today and assuming they have a lot of time value left also, in addition to the intrinsic)? Is that what you are saying? Yes or no?

If you say that they cannot get their profit out, then obviously options are a scam, and I would like details as to how the exchanges get away with that scam. (I'm talking about CMX options, not broker or boiler room options.) I don't think the bid-ask spread and liquidity would preclude execution of the RELATIVLEY small number of options represented by those on this board. Comments?

If they CAN get their profits out, then I would have to say that Norman's post above was possibly correct in saying that one of your objectives is to dissuade people from getting "distant out-of-the-money calls on the Comex."

-- A (A@AisA.com), October 06, 1999.

flierdude: Take some profits as the price increases. There's a saying -- bulls can make money, bears can make money, but (greedy) pigs don't.

Also, as Dick correctly said, nothing goes straight up. It's typical to see 1/3 retracements of movements. Like the 260 to 330 movement could retrace back to 305, before continuing back up (if it does). If you sell a few on a decline after a big rise, you have made a profit. If the decline is a retracement, then you can buy some again at a lower price.

-- A (A@AisA.com), October 06, 1999.

Dick:

Thanks again for sharing you experience with technical indicators as well as your general knowledge of the markets.

As far as option trading is concerned, experience is the best and probably the only teacher. For example, I know a brilliant market analyst who occasionally dabbled in the markets, as a side lines to his real business which was (and still is) selling his market opinions.

Several years ago he took his own advice and bought deep out-of-the-money 100 gold options with more than 6 months to expiration for $10,000, catching to bottom almost to the day. The next thing he knew, he was sitting on almost $300,000. He was visiting me at the time and I urged him to take partial profits on the way up, AT LEAST to cover his original ten grand. Unfortunately, he was convinced that gold was going much higher. The rest is history. Gold topped out at around $423 and headed south never to return. He lost everything including the original $10,000.

Now, if he were trading gold options today, I think there is a much better chance that he would take your advice, but first time players...I doubt it.

-- Dr. Roger Altman (rogaltman@aol.com), October 06, 1999.

Dick,

Absolutely, I could be wrong. For one thing, the real big players (central banks, governments, people like the Rothschilds) have been building contingency plans to "manage" Y2K, the Euro, gold, the stock markets and the economy for years now. What do they have to control these things?

* Gold reserves

* Foreign Currency holdings

* Commodity reserves

* Bonds and bills

* Taxes

* Laws

* Executive orders

* Force

These things can change the value of any asset class up or down. That's why you have to diversify. That said, I think we are at the end of a equity bull market. Over the last 300 years, a hard currency bull market has almost always followed the bursting of an equity bubble.

-- ng (cantprovideemail@none.com), October 06, 1999.

Mike,

Try getting you money OUT of those positions. i.e. Try executing the sell order in a fast moving market. They'll take it all back to the cleaners. Remember "time" is not your friend its your enemy. I've known guys with FAR more lucrative situations than yours that couldn't execute the orders in time to get out with profits.

I'm saying that it is difficult to nearly impossible for the average person to make money on options, especially Gold options. You have to have an "excellent" broker who can execute you out of the position at the right moment in time when that opportunity is there, especially in fast moving market. Getting into an option is easy. Getting that option to show a paper profit is EASY. GETTING OUT with that profit is the real trick. My point is that not many do. Most of those that do are professionals monitoring the market every second of the day. I've seen brokers trading their own options miss the moment to execute because they got up to go to the bathroom. The market never landed back on their price point. Boom. Done! It's not nearly as easy as it looks or seems. 9 times out of 10 the typical average retail investor will lose on options because so many things have to go just right.

I think that the DOW and the GOLD markets may well crash together! IF so ALL markets will crash.!!!!What are the odds? You tell me whether or not the grid goes down, the phones go down, oil goes out and then I'll tell you the odds of a market crash.

To "A"

See my post to Mike above, but in essence it applies to Comex and all options. Guys, we saw and heard of problems with guys trying to get their options executed just this past week when the markets put restrictions on how an option trade is to be executed by market orders only. I am NOT saying thatno one can make money on options. My point was that there are so few average retail investors making money on gold options that I've never met one and shaken their hand. Met lots that lost. I've met pro's that made money on gold options, because they monitor every second and have instant access to the trade, and I mean instant as in a second of time. They get split second access that sometimes means the difference between getting out in the money or not making money at all even when they held huge gains.! My point is that if you conduct your activities like the typical options trader, you'll lose when it comes time to 'cash in' because 9 of 10 lose in the final curtain call. My point is that taking the contracts themselves offer a little better odds of cashing in on profits than with options. Neither one are sure things. Most, still lose and for a variety of reasons but still contracts are better than options for the little guy. I always told folks that wanted to trade options to just go to Vegas, they'll get better odds and have more fun. It's true!

NG,

I agree...however, Y2K is the great wildcard JOKER in the deck and if Y2K is a 4 to a 7 it will be a mess for all the markets and financial instruments. I look for a World Dictatorship to take hold if we get a 4-7 Y2K result.

Roger,

Excellent point and story about options. I agree with you.

-- Dick Moody (dickmoody@yahoo.com), October 06, 1999.

Dick, My response to your post has TWO parts. First: an Introduction as a veteran but SMALL POTATOES goldtrader. The Second: a Response to your "Gold May Be Outlawed" off the cuff, dismissive remark.

INTRODUCTION: As another veteran gold trader, I appreciated both your willingness and the time you spent composing your post and sharing your knowledge from the pits.

I WAS a licensed commodity broker for a short stint about 18 years ago. My Favorite technical indicators, bar none are: CCI, DMI, and RSI. I'm indebted to computer Tech Analysis software for making the math part of my trading so "user friendly."

I AM a life long HOBBYIST coin collector hobbyist-Lincoln Pennies mostly.

And I DO have a financial interest in what I'm about to share about physical gold ownership and most people's fears of gold confiscation. I currently own 4 small goldmines physically. I am "webmaster" at a 5th mine to help out some miner friends. (website: http://www.oregontrail.net/~ortrailrv ) I did the "html coding thing" for them as an aside, in exchange for some hardrock mining coaching since LODE mining is a new skillset I wish to acquire. FWIW: This URL is the ONLY CyberSite on the 'net where an ordinary or a sophisticated person interested in acquiring phyisical gold can participate in an actual mining experience from their desktop PC or on site: Viewer's Choice.

I am LONG the gold market via COMEX futures options (June 380 Calls) and currently have very, VERY large P-A-P-E-R, %-wise. Your comments about how difficult it is to discipline emotion and bank the profits and run are very on target, altho' not impossible to acquire and exercise. And exercising the Long Call options INTO THE ACTUAL underlying PHYSICAL COMEX gold contract is a choice to wit you did NOT address.

I am LONG the physical gold market 3 ways: via both my personal mining output via actual holding of physical gold in both coin, scrap gold, and raw nugget gold via actually recycling gold (during mining's "offseason" which in my part of the world is basically November to April) Yes, I am a gold recycler. My out of pocket cost, including refining and assays is a $20 per Troy Oz cost per ounce of 24Kt recovered gold. And yes, I wrote a small book(with sampler kit and gold tester enclosed) almost 10 years ago, and updated just August 999, on how others can acquire recycled gold for $20 per oz cost, also. And yes, it is still available.

As a physical gold expert, I have also been called upon these last 18 months to help various "ordinary people" acquire privately and without fanfare, their Y2K gold. To translate that last comment: I have sold more physical gold (both BULLION Coin form and Raw Nuggets) in the last 18 months to "Y2K Prepared and Preparing" than I have in the the last 30+ years combined. And most of these gold sales have come about as the result of two things: my appearances as a repeat guest on Radio Liberty, Dr. Stan Monteith's Radio Talk show, and from my postings in the last 18 months on Y2K threads, trying to educate Y2Kers about physical gold.

It has been an utterly amazing and humbling experience to have people I've never even met send me money and trust me to send them their gold. It starts by someone trusting me with anything from $500 hard earned money up to wiring in large amounts in multipled thousands, on a regular basis so that I can acquire their gold, and ship it back to them registered, insured US MAIL. Then THAT person tells someone else about me, and pretty soon, I have another order and another order and another order. I've never experienced anything like this sight-unseen gold customer that internet connectivity has brought to me.

I believe I have pretty much covered the waterfront here in this introduction/full disclosure segment. Now to the meat of my intended response to your "outlawed gold" (perceived by me anyhow-->) flippant remark.

GOLD OWNERSHIP AND POST Y2K CONFISCATION/OUTLAWING COMMENTS:

We all have our GOLD blind spots, Dick. While you are a demonstrably WELL-VERSED, veteran of PAPER gold trading mechanics, and have generously shared both your fundamentals, and technical interps, and believe I have assessed the source of your off-the cuff remark re: future outlawing of gold. I believe you lack historical frame of reference regarding prior confiscation of US gold. If I am mistaken in my assessment, would you please bear with me as I share what I believe are a few salient points re: prior confiscation, and address what I believe to be is the LOW probability of future confiscatory gold activities in the POST Y2K future.

First the history. The prior confiscation took place in a particularly difficult period of time in our nation's history. THAT Confiscatory legal action was the direct result of our nation guaranteeing the REPAYMENT OF GERMAN WWI WAR REPARATIONS TO FRANCE IN GOLD. This was a source of the tremendous hemorrhaging of gold from the NY Federal Reserve vaults in particular. That war may have been "over in 1918" but its war reparations games particularly played out in European capitals financed by the physical transport of gold out of NY Fed's vaults, via ship, to Paris was staggering to unthinkable.

Our financial system had been rocked in '29-32 by another catastrophic event, the infamous stock market crash as well.

Our sitting President was persuaded to take drastic action which he did. A mere 10 days after outlawing private ownership of gold, he had to issue an revision via Executive Order to make it okay to hold numismatic gold, i.e., gold coinage with a "collectible or sentimental value" over and above intrinsic value.

The current goldholders in this USA are particularly indebted to the now deceased James Blanchard for us being allowed to legally own gold again, in ALL of it's forms.

THE ACTUAL CONFISCATION WORKED LIKE THIS: The laws are STILL on the books, make no mistake. But it worked like this: The bank manager was required to FREEZE all safety deposit boxes, and an IRS AGENT was assigned to each banking facility. S/D box holders were called in, required to open their boxes, and ALL gold, at least for within the first 10 days of the new law's effective date, was seized, i.e., phiscally removed by the IRS agent and bank mgr. Then the S/D box holder was "paid" $20.67 per troy ounce for all gold seized, and they moved on to the next S/D box holder in line to repeat the process.

This is both documentable historically, as well as annecdotally, since people from those years are still alive and able to confirm this set of facts as I have presented them.

HOWEVER, there are three other parts to this highly emotional "confiscatory" story that MOSTLY NOT told at the same time the official S/D box raid were occuring.

They are: 1)The voluntary/required surrender of personal gold and its procedures 2)The requirements of the confiscatory law and the Executive Order upon those that mine gold 3)The restrictions upon importation or exportation of gold upon US citizens.

It is along these lines that I would like to expand the education of ordinary folks who fear that their Y2K gold would be seized. I am the first to admit that there are many in the physical gold selling business, who solicit Y2K buyers for their particular gold recommendations upon the internet currently. I am also aware that most of these RETAIL gold coin sellers are playing up real big the fears of confiscation of US gold. I am further aware that these RETAILERS are pushing their inventory of gold coins to Y2Kers by stating or inferring, IN PRINT, that "only pre 1932 coins are safe for Y2K concerned Americans to hold."

Of course, these retailers have plenty "pre-1932 gold for sale" and are playing upon the very fears they are helping to create in their potential customer. It is one of the strangest marketing ploys I've ever seen. Scare the customer and hope to make a sale. Very illogical, to my Spock-mind. Your comment regarding emotions in the physical commodities market come to mind here as I watch the unscrupulous pry on the very people they are petrifying with confiscatory talk in order to sell THEIR customers "non-confiscatory gold."

It is ludricrous to imagine for even a fleeting moment, that if someone buys their gold from XYZ or MNO Gold Coin Retailer's "current inventory of pre-1932 Gold" that this will someone magically immunize said buyer from any seizure. HOGWASH! That is not the way this set of laws and Executive orders work IN ITS ENTIRETY at all!!!! And folks, Y2K interested or NOT need to understand this. Especially in the light of the enthusiasm currently rising as the price of gold awakens from a 20 year slumber.

Now, the rage, of course is for these unscrupulous RETAILERS to offer pre-1932 FOREIGN ISSUED---translate this FRENCH and BRITISH coins---(hmmm, wonder where they got all their Post WWI gold???) gold coin inventory to Y2Kers. Especially, in light of the fact that the US made comparatively little pre-1932 gold that is NOT already terribly inflated by collectible premiums over its intrinsic gold composition value!

I get "emotional" when I see the fleecing going on at the expense of those trying to acquire their Y2K gold. And that emotion is one of ANGER. Make no mistake here, I believe GOLD IS EXTREMELY IMPORTANT TO PHYSICALLY POSSESS during the Y2K chaos directly ahead. I am acquiring it, as mentioned above in my disclosure segment, and want everyone to do as I have done, in this financial preparation arena as well. To expect me to say one thing while doing another is simply unconscinable. I want all to be prepared for the new financial reality about to hit us like 2 colliding commuter trains in less than 90 days.

I have spent the time studying my physical gold craft just as you have spent the time perfecting your PAPER GOLD futures trading craft.

The safe and sane way of acquiring gold and KEEPING IT post y2k are embedded within the existing laws and E.O.'s if one will just LOGICALLY approach and review this historical confiscatory period as unemotionally as possible.

While I agree that past history does not guarantee future profits, such as all commodity trading caveats clearly state, REVIEW OF THIS PARTICULAR PIECE of US HISTORY does hold both a pattern that is workable and logical for anyone truly interested in maximizing their gold acquired for Y2K usuage or wealth preservation in the coming chaotic decades. While said pattern can be changed or altered, and I cannot predict the future, I am here to categorically declare this: I DO NOT BELIEVE FOR ONE SMALL INSTANT, that gold will be outlawed in this nation anymore than canned tuna or scrap copper can or will be.

I offer this response to you as both a sign of respect for your shared knowledge re: COMEX gold futures trading, as well as in the spirit of generating HOPE and WORKABLE, RESPONSIBLE PHYSICAL GOLD OWNERSHIP. It is my small way of trying to help "unscare" as many people as I can in the few days that are left prior to Jan 1, 2000

I do so hope you will continue to post your take on the gold futures market, since I believe it is has value to all who will listen to you.

I, too, will remain available to this forum for any questions as to how to logically, and sanely, and as unemotionally as possibly acquire, hang onto, and UTILIZE their gold in the chaotic days I'm personally convinced are directly ahead.

Morgan

-- Physical Gold Expert: Morgan (origgpress@aol.com), October 06, 1999.

Morgan: Thanks for taking the time and trouble to provide the info that you did, I don't think that I have ever seen so much Y2K-relevant gold facts put so well in one great package. The info regarding how bank safe deposit boxes were treated as part of the 1933 U.S. gold confiscation process is especially newsworthy -- lots of time people on this forum will suggest that safe deposit boxes are the place to keep your cash, gold and silver. Thanks for providing the proof that it sure is not!!!

-- King of Spain (madrid@aol.cum), October 06, 1999.

Morgan,

Thank you for your excellent post and offering up your observations. I personally have never recommended pneumismatic gold coins or any collectible coins for purposes of use as an alternate currency. Collect them for the joy of collecting as you might for stamps, but not as a possible use later if currencies were to collapse. The reason, of course as you yourself well know is that the "premiums" for those coins will likely never be honored in a collapse when one would go to use a collectable gold coin to buy flour. One might get a flour/food merchant to accept the metal content value of the gold coin but not the collectable premium for it. Therefore, I've always recommended basic gold coins. The current Eagles, Maples, and yes, even the Krugs. The Maple Leafs are my personal favorite. I recommend 1/10th and 1/2 oz coins as well as the full 1 oz coins as possible selections. Personally though, were it me, I'd mix a $100,000 metals portfolio with junk silver, and silver rounds (like Englehardt) along with 1 oz gold coins and not mess with the fractional gold coins. IF I ever needed to spend the metal coins for consumer use, the silver would probably work better at the grocery store than the gold coins especially better than the fractional gold coins because of premium factors. Thus, a mix of the two metals works best. (I'd avoid physical platinum because it is so unfamiliar to the general public).

Now, having said all of that, I again want to re-state that gold and even silver could indeed be outlawed someday. IF things get really bad I'd expect that to be a very distinct possibility if not likelihood.

Your insight into the previous gold confiscation is definitely worth noting. Will they repeat such actions? Who knows? I don't. But a lot of folks out there think that it can't happen. Well, it did, once. Therefore, I simply raise that fact to underscore the possibility of it happening again. Should folks have some gold? Perhaps. It's not necessarily for everyone. IF they don't or can't afford gold, then they should hopefully be able to afford some silver.

I agree with you about the shysters in the gold coin market talking pre-1932 coins. Those of us who are/have been legitimate, honest folks in the business of gold do feel the pain of those who've been fleeced by the unscrupulous dealers. It gives everyone a bad reputation and the bulk of the dealers out there are honest folks who believe that precious metals are true monetary wealth.

A final point to ponder regarding confiscation of gold. IF/Should the government decide to outlaw gold, they may do it completely different than last time. In fact, it might be outlawed "worldwide" and thus make owning foreign coins equally unlawful. The next time it might be done in German Stormtrooper fashion where they come into your home to confiscate coins, bullion, guns, food, or anything else that resembles stockpiling. Do advocate doing nothing, then? No, I simply make a statement of caution. Be advised. My concern is a coming world wide dictatorship that will make Hilter look like a kindergartener. Will it happen? Better to answer with, "It could happen." IMHO.

Thanks again for your post, look forward to your further insights. Hopefully you can provide valuable information to help those innocent beginners trying to prepare for Y2K.

-- Dick Moody (dickmoody@yahoo.com), October 06, 1999.

I'm guessing your comments on the options market are from the point of view of a scalper. I grant that if one is trying to make a few points, that by the time the order gets in, the bid or ask could be different so a limit order wouldn't get fullfilled, and that if a market order is place, the fill might be off enough points so that the potential profit is not materialized.

In the cases we are talking about here, it is not a few points per options, but many dollars per option. Not in-out-in-out "watch the ticker" scalping, but taking advantage of a once every ten/twenty years situation. Are you saying that if there is an option bought at 10 and now priced at say 50, and there are bids and asks around that price, that the market is so illiquid that as little as one to ten options couldn't be liquidated? In a near month? In a distant month? If so, why aren't the bid-ask prices posted to reflect actual bid-ask offers?

Or are you saying that the brokers post bid - ask and when someone "calls" them on it, it's "Never mind, just kidding!"

-- A (A@AisA.com), October 06, 1999.

Above question was for Dick Moody.

-- A (A@Aisa.com), October 06, 1999.

Response to "A"

Re: Options

No, I was referencing longer term plays in the markets. When markets are moving fast, which is usually when a retail investor gets involved they try to unload in fast moving markets. Special rules usually come into play during such periods of tumult making exits from a option position all the more difficult. You also have to factor in the time involved in the option in terms of its value as well. If you live in a big city where there are "brokers" like say, NYC or Chicago, or Kansas City, Minneapolis, find out where the brokers hang out after work at a local watering hole for brokers...you'll hear the "horror" stories of brokers as they laugh about the poor sapsucker clients who tried to get out of in-the-money options positions only to miss out and not get the exit order filled. These brokers love... and I mean LOVE to tell those stories and laugh their ____ off as they regale one another with how stupid the average investor is in regards to options trading. Then they go back to the office the next day and pitch the virtues of options. Brokers make tidy little commissions on options traders, or at least they used to before the days of on-line brokerage houses and discount trading. Also, the cheaper the commissions, the harder it is to get a decent "fill" whether it be for options or contracts. As they say, 'you get what you pay for.' And of course, decent fills are absolutely difficult to fit when a market is running wild and only "market orders" are accepted.

I don't know why some of you find it so hard to believe, other than the fact that you're new to the options game and you believed what you've been told or read. I wish I had a dollar for everyone I've met or talked to that lost money in options. A lot more of them fit that mold than those who lost in the actual contract trading themselves.

I've seen guys take positions before and see their options move $50 to $100 in the money and STILL end up losing it all because they never could liquidate it at the appropriate time a month or two months or 6 months later, depending on how far out it was. You can have a right position on an option that agrees fully with the market move, and be deep in the money and still come out of it without a dime.

Guys, I tell ya, this is getting monotonous. You don't believe me? You'll just have to experience it for yourself. But I tell ya, one night of drinking with the boys at the local watering hole outside of an exchange or a joint where broker's gather in other cities, and let me tell ya, you'll learn a lot more than you care to know. In fact you'll probably want to go get your money take out into your backyard and dig a hole and never trust anyone with your money again. Because what you see and hear at the watering hole accounts for much of the way they view the markets (stocks/bonds included) and how they operate. They will usually tell it pretty much the way it is on options and laugh about it all night long. So don't take my word for it, go check it out. If nothing else, and you're dealing with a lot of money, it would be well worth it to take a few days to fly to NY or Chicago and visit the watering holes outside the exchanges during the market and afterwards. IF you do, remember to 'stay sober' so you can comprehend what is really going on and take mental notes. NOW THEN you'll really learn alot because you'll probably bump into floor traders and "locals" trading for their own accounts. Who knows you might get lucky and make friends with someone who can really get you fast action on the floor. IF so, then you stand a fairly good chance (but by no means a cinch) of actually getting decent fills on an option or contract. Sometimes its not what you know but who you know.

-- Dick Moody (dickmoody@yahoo.com), October 06, 1999.

Dick -- so then what can the small investor do with such a supposedly in-the-money option? To me, if an investor cannot get rid of the option, then that means to me that the bid-ask prices are FRAUDULENT. Maybe the bid-ask spread would have to be widened greatly to reflect reality, but so be it.

Assuming the investor has an account with a futures brokerage, would the brokerage assist in financing the EXERCISE of the option, the option (assuming its a call) being the right to buy a futures contract for a specific month for a specific price. It would seem that if the brokerage is legitimate, that this would be an alternative, and the brokerage would do it without requiring a huge margin (maybe even "lending" the investors any necessary funds), since the futures contract exercised on would have a built-in profit.

-- A (A@AisA.com), October 07, 1999.

"A"

You have to be deep "in the money" and fairly far out to probably ensure profits in a fast moving market. There are so many variables that its hard to speak in general terms. But the options price value is affected or shall I say "eroded" over time. The more in the money it becomes the more compensation that makes up for the time-decay valuation. But you can be moderately in the money on an option and hang on to it targetting the last day of trading to unload it, only to find that the time-decay has eroded much of the value plus possibly the market moving the option to "at the money" or barely in the money and ... also to find that there is no one interested in taking up your option. For every sale there has to be both a buyer and seller.

Again, there are simply so many variables on this. Fast moving markets can change the way orders are implemented and suddenly you're in a "market price" only so that specific prices are not allowed. Thus you're force to put a market order that once touched off but not executed then becomes a situation where the instructions are for the floor trader to execute the order at any price. This has a chilling effect on options trading and dries up the participant pool putting your whole strategy at a greater risk. I've seen many a folk who had winning positions, deep in the money positions let those things decay because they wanted more, only to come up empty-handed or at a loss of the premium. Sometimes the bid/ask spread is a factor and sometimes its not. We're not talking about anything necessarily illegal and not necessarily immoral, I suppose, but certainly complicated enough and so intricately interrelated that in reality it becomes a stacked deck for the average individual retail speculative investor. Remember, options are primarily a hedging tool for producers and has been allowed to be used as a speculative tool, primarily to aid in liquidity for producer hedgers, not to mention a nifty commission maker for brokerage firms.

-- Dick Moody (dickmoody@yahoo.com), October 07, 1999.

Dear Sir,

I am a mediator for AU Metal Bars. Presently I have a buyer who is interested in buying 5000 tons GOLD METAL BAR in 12.5 kg bar OR

-- R.VISWANATHAN (poorvila@yahoo.com), December 04, 2001.

Dear Sir,

I am a mediator for AU Metal Bars. Presently I have a buyer who is interested in buying 5000 tons GOLD METAL BAR in 12.5 kg bar OR 1 kg bars in MODIFIED SWISS PROCEEDURE - VIA BANK TO BANK with a discount of 7% ( 5% gross to buyer and 2% to be shared equally by seller and Buyer's mandate). He is ready to lift any quantity available with you or through you. We can close the deal within 72 hours. Suppose you have stock Or you can arrange for the shipment please contact me to my e mail: poorvila@yahoo.com with your FULL CORPORATE OFFER. Your early reply is requested.

R.VISWANATHAN. 05.12.2001.

-- R.VISWANATHAN (poorvila@yahoo.com), December 04, 2001.

Dear retarded Goldbug dealer,

Would you look at the dates here? The last post here was over two years ago! I sure would hate to find out you're investing MY money!!

-- (Adolph@Anrimiter.now), December 05, 2001.

But, damn fine commentary nonetheless if you take all the Y2k horseshit out of it. Two years ago. Wow! Where does one find discussions of this calibre on the internet now? Where did these people go?

-- (Brad@home.net), December 06, 2001.