That was the week that was!

The market has seen an extraordinary week with the large Speculator taking full control of this market, shoving aside physical demand completely. What a performance the "Speculators" have put in, what a firm grip they have on the market. Against the media speculation, against Analysts advice, against all and sundry, they steadily bought and bought and bought, keeping all other potential buyers at bay. The buying has been attributed to the Funds but is of such a different pattern to the usual capricious nature of Funds, that we have to ask, have they changed their behaviour or not. If they have not they could drop their positions onto the market at short notice!

Please note one fact of life; the funds are NOT long-term holders of gold. If they think that gold looks good for a run, they will buy for the run. Funds have been selling heavily, as recently as today. Comex is not the place to buy physical gold, London is far better suited to it. Comex is a futures market.

Having said that, the Speculators' have continued to build record long positions [see below]. A change in the nature of gold "Speculators" seems to have appeared. We mentioned this and evidenced it last week, and it is persisting and proving our point. Their behaviour is consistent with the behaviour of clever Investment buyers, buying [to take delivery?] on COMEX and to hold for the longer term.

Or perhaps we are seeing Investment buyers hiding amongst the Funds, buying steadily as though disguised? We cannot say that this is happening for sure, but we see all the signs for this to be so! If this is so, there will be no headlong rush for the door, but if not, the crush at the door will be crippling.

The gold Price at the time of writing was $372.0

Global Gold Demand

A fundamental facet of the gold market is the way in which it can defy normal market rules. Usually, in a commodity market demand falls in line with rising prices, alongside rising supply until equilibrium between the forces are achieved. In defiance of these basics gold's price has risen significantly over the last year. GFMS reports that Global gold demand grew, by about 5.2% year over year, in the second quarter of the year. It totaled 1,010 tonnes against 960 tonnes last year.

Japan gold buyers yen sellers

The Japanese have been good buyers of gold in the last week, with the Bank of Japan ensuring that whither the $ goes, the Yen goes too. As we have said often in G-AM, virtually all the world's currencies want to keep weak against the $, to protect their trade competitiveness. As a result, the levels of each currency against another, cannot prove an effective measure of any currencies real value, simply relative value and chosen value decided by the government of issue. The acceptance of gold as an alternative is growing quickly!

Jewellery dis-hoarding?

The Commercials are very short as well, implying a shortage of physical demand. However, it is clear that the Jewellery market is healthy, as we reported last week. Are we watching a battle of the Commercial "Shorts" against the Speculative "Longs"

These commercials are those who use gold in their business and include jewellers who sell scrap into the market. If the Speculators are simply chasing a run in the gold price, they will get their fingers burned, by the Commercial shorts, as they did after the Iraq war. Alternatively, if they turn out to be investment buyers in disguise, they will remove key amounts of gold from the market, squeezing commercial shorts in the process.

India

We expect volumes of buying from India to remain low for the next couple of weeks,until the 23^rd of September when they get ready for Diwahli.

Speculative Net Long Positions

The pattern of increasing the net Long position in a fairly determinable manner with the gold price continues. The net long position is in the order of 13.7 million ounces only slightly above the line we showed you last week. As such there appears to be a relationship that is on track with the higher gold price. Again it seems that there is a very responsible approach to this speculative [?] overhang. We will be watching this pattern closely, until it proves itself in the coming weeks.

Germany to sell only small amounts with New Central Bank Gold Agreement

Perhaps as a preparation for the I.M.F. meeting later this month in Dubai, or part of ongoing, behind closed doors, Central Bank discussions on the review / renewal of the Washington Agreement.

The gold market has been speculating on the review and renewal of the "Washington Agreement", feeling that the leading holders of gold want to sell their gold holding, but it became clear that the bulk of these sales would have to come from the leading Central Bank signatories to the Washington Agreement, Germany, France and Italy, as the largest holders of gold in Europe. The most talked about and vocal of these three, has been Germany, leading the market to believe they would be significant sellers.

Today, Finance Minister Hans Eichel clarified Germany's position regarding sales of its own gold. He said that he would envisage the sale of only small quantities of gold by the Bundesbank if a new international agreement on gold sales is achieved."The gold market is sensitive and if the Bundesbank takes part in a new gold agreement, they can only enter the market in small amounts," he said. [Please note that when a small quantity was referred to previously by Germany, they referred to the 26 tonnes sold in the form of gold commemorative coins. We would think this is still what will be meant by small quantities.

This is good news for the gold market, whilst tacitly indicating that the other two, France and Italy, with a greater propensity for holding gold in their reserves, will not be significant sellers, if at all, of their own gold holdings.With only minor Central Banks still indicating they would be sellers of gold, the market will have to get used to the idea of greatly diminished gold supplies emanating from the "Official" sources.

Additionally, his statements have encouraged the market to believe there will be a renewal of the Central Bank Gold Agreement.The market is speculating that the Central Bank Gold Agreement review will be initiated at next month's International Monetary Fund meeting in Dubai. We await the meeting with interest!

In the next issue of "Gold-Authentic Money" we examine the ramifications of this announcement closely. In this service of ours we will attempt to keep a thorough focus on the "Official" market.

Short Term Prospects for Gold

• The Euro stands at 1.0915 down up from 1.0750 to the U.S. $ last week. All still looks good for further rises!
• Consolidation above resistance at $370 has been taking place over the last week, building a strong base for further moves up. We have made our targets very clear, through "Changing Tack- Gold & Precious Metal Shares" and "Changing Tack" services, where we give the precise price levels we expect to see.
• Our "Market Alerts" alert Subscribers to take what we see as the best positions in the market. We always communicate on Technical Analysis, by e-mail [for the [personal touch], the moment a market signal is given to take action, so helping them to benefit from both the rises and falls in the market place. Our subscription details are below.

Gold Fix 4^th September a.m. $ 372.20 E 344.056

Gold Fix 4^th September p.m. $ 370.75 E 340.857