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Richard Russell snippet
Dow Theory Letters
August 12, 2004

Extracted from the August 11, 2004 edition of Richard's Remarks

I do want to say something about gold. Gold is down five bucks this morning with December gold (again) below 400. Subscribers must look at gold as a long-term holding. In the end, the US is fated to drown in liabilities, and in the end the dollar will fall to the point where it will no longer be accepted as the world's reserve currency. But until then, the world, really the Asians, will "play the game" in which they will continues to accept and accumulate dollars.

Why are they doing this? They're continuing to accept dollars because this process allows them to continue to sell their products to the US. Yes, it's a game. Yes, it can't go on forever. Yes, the US and the dollar will finally drown in liabilities. Yes, this is ultimately what the bear market is all about. And yes, there really seems to be nothing that will reverse this process.

In other words, the US continues to build up liabilities and the rest of the world, mainly Asia, goes along with the game of accepting dollars. It's the biggest game in the world today. And ironically, the rise of Islamic fundamentals danger is used to justify the monumental spending path that the US is on. Iraq, I'm afraid, is just the beginning. The US has elected itself as "policeman to the world," and the rest of the world is only too happy to bestow that honor on us. After all, think of the money they save.

The whole system is obviously doomed, but the world's politicians don't think in terms of "doom." Doom is in the future, and politicians are concerned with "now," and the next election.

You want to leave your kids or grand-kids something of guaranteed value? Buy them gold coins -- don't leave them dollars in the bank. That's the true use of gold. When everything else comes into question -- only gold will be trusted. Thus it has been since the dawn of civilization.

At present, in terms of Federal Reserve Notes (dollars), they're "giving gold away." It's a bargain -- IF YOU'RE WILLING TO WAIT.

Big money loves cheap gold. The lower the dollar price of gold, the more gold they can accumulate with their irredeemable junk paper.

Richard Russell
Dow Theory Letters

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