Griffin Mining - The Share for 2003.

During recent research, I came across this article which might be of interest to you gold diggers out there.

YELLOW METAL FEVER
By Ian Williams
Wed 11 Dec 2002

There are several other potential developments about to unfold that could have a dramatic impact on the gold price next year. Firstly, leaks are emanating from senior Chinese monetary officials that from January 2003 ordinary Chinese citizens will be able to buy and own gold bullion (a new gold exchange has just opened in Shanghai).
Taken at face value this seems a rather odd development as China is still a communist country where private ownership of assets has always been discouraged. However, China faces a huge problem similar to thatfaced by Japan for the last 30 years, namely the management of the currency - in China's case, the yuan - on te foreign market, in the face of a large and ever-increasing trade surplus.
Wages for a Chinese factory worker are around $5 a week, compared with, say, $500 a week for a German factory worker. Little wonder, therefore, that factories are closing down in Germany and opening up in China. As a result, China is becoming the manufacturing cradle of the world and its trde surplus just gets bigger and bigger.
At present the yuan is pegged to the US dollar but this peg will become increasingly difficult to maintain. At some stage it is inevitable that it will be unpegged and the yuan will roar upwards, tothe detriment of China's competitive position.
The Japanese solved an identical dilemma by exporting capital via the purchase of US government bonds of a similar size to the trade surplus - thus ensuring a rigged and stable $/yen and the maintenance of the structural trade surplus.
However, with China likely to confront the US over Taiwan, it does not suit the Chinese to have their reserve assets tied up in New York where they could be frozen if a conflict develops. This is why it suits the Chinese authorites to let their citizens buy gold - because the foreign exchange flows work exactly the same a Japanese purchases of T-Bonds (ie, to offset the trade surplus) and help allieviate upward pressure on the yuan.
India, with a population of 900m, is the largest buyer of gold in th world but China, with a population of 1.2bn, has the capacity to match and exceed Indian gold demand.
The second development that could affect the price is the introduction of the "Gold Dinar" by Malaysia, also scheduled for early 2003. This is not a new currency as such but a bilateral means of payment to cover trade flows between two participating (Islamic) countries.
The way it will work is that Malaysia will agree to settle its trade with, say, Iran, at the end of every three months by either transferring or receiving gold via the respective central banks to cover the money difference in trade between th two countries.
It is the hope of the proponents of this scheme that eventually a series of bilateral arrangements of this type wil be used to settle all trade in the Islamic world. This scheme, which has taken five years to bring to fruition, is in response to the Asian currency crisis of 1998, which did so much damage to the region's economies.
The obvious advantage fr the Malaysians (and the others) is that it completely removes the US dollar from their bilateral trading arrangements. Also, gold, as a non-interest bearing instrument, is ideal for an Islamic replacement for the dollar (charging interest is forbidden by sharia law). Any widescale adoption of this scheme will result in a much greater demand for gold among the central banks of the participating countries.
Either of these factors would be sufficient to change the delicate balance between supply and demand that exists right now. Total global demand for 2002 is around 3,900 tonnes, comprising jewellery demand of around 2,750 tonnes with other types of demand making up the balance.
Total global supply is also around 3,900 tonnes,comprising mine output of 2,500 tonnes, central bank sales of 500 tonnes, recycled scrap of around 700 tonnes and a few other smaller items. As can be seen, jewellery demand already exceeds mine output, without any investment demand at all.
THE CONCLUSION WE WOULD REACH IS THAT GOLD IS ABOUT TO BE SUBJECT TO EXTREME UPWARD PRESSURE OF THE TYPE NOT SEEN FOR 20 YEARS. FOR INVESTORS WISHING TO PARTICIPATE IN THIS POTENTIAL MOVE, A SELECTION OF UNHEDGED GOLD MINING STOCKS WOULD SEEM TO OFFER THE BEST ROUTE.