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the US$ is Toast!
Nick Nicolaas
Oct. 27, 2004

Dear Friends:

The January 1, 2005 turnaround date which I mentioned to you in my previous missives is just around the corner but there is still time, although not much, to get your house in order. Get positioned now!


"We are getting close to the URGENCY by the public world-wide to buy gold and silver but this URGENCY will not start until

  1. the Yen rises against the US$ forcefully, and
  2. gold in Euros goes past E350.00; and
  3. gold in US Dollars breaks thru US$500"
  • From my previous letter #31 "why are the Japanese Holding up the American Economy" it is clear why the Japanese are buying US Treasuries i.e. with Japanese savings, for which Government pays next to nothing, and then buying US Treasuries at a higher interest rate and pocketing that differential. But now the US$ is cratering and because of that change in exchange rate the Japanese are pocketing less and less as the US$ craters. The result will be Japanese Treasury buying will dry up speeding the downfall of the US$ and strengthening the Yen.

  • During the past years the rise of gold for Europeans has been a yawn i.e. 0nly 1.5% increase in gold in Euros year to date vs gold in US$ 10.5% increase year to date. So you can see gold has been a good investment during the year in the US but for Europeans it has been a bad place to park their money. However, when gold breaks 350.00 in Euros then that will be the URGENCY signal for the Europeans to get into the act and believe this: "Europeans know the value of gold better than anybody else in the world. They know that paper money is just that "PAPER". They experienced buying one loaf of bread with a case full of that paper money.

  • The real URGENCY in North America will arrive when gold breaks US$500 and then all H… will break loose. In the interim look for gold to break US$430 (we are close to that now) and then it will have a nice rally from there).

Now this is important: the US$ is history and now THERE IS NOTHING THE FEDS CAN DO TO STOP THE SLIDE TO BELOW 70 ON THE US$ INDEX (today we had a low of 84.79 and thus it has broken several pips below the February 17th low of 84.92 and therefore "we are going to the next lower level").

What does this mean to you: It means that inflation will be driven by a lower dollar (lower purchasing power) chasing higher priced goods (by the way, make no mistake about it, there is inflation and even imported cheap goods will become more expensive. In China workers are now striking for wages of 30% higher or more – still cheap labor but higher wages nevertheless).

A lower US$ for example brings on inflation by having to pay more US dollars for even higher priced goods (many of Hong Kong's fishermen are no longer going out to sea because the cost of the fuel to run their boats is now above the price of the prospective catch. This fuel price escalation in turn is also happening with wheat for example – farm equipment requires a lot of fuel. Thus the supply side will be drying up as well).

As an interesting aside, the day before yesterday I met with a commodities broker in Chicago who also happens to be a good friend of Bill Murphy from GATA and . I met with him to give him an update on my favorite silver explorer, Tumi Resources (TSXv – TM; OTCBB – TUMIF and Frankfurt – TUY in which this broker is a shareholder) and to tell him about the new gold explorer in which I have a position, Mawson Resources, and when that stock will be called for trading on the Vancouver Venture Exchange (TSXv – MAW - trading will start at the open on Friday October 29, 2004).

We both agreed that stocks such as Tumi and Mawson will do very well indeed in this metals bull run and with regard the US$ he said:

"From everything I see the US$ is going deep-south. As you know I used to be a trader in the pits and I have a lot of friends in the other building on the trading floor who I speak with on an ongoing basis and they are still looking at the US$ on the basis that it is on a fixed exchange rate".

So you see even the traders in the financial heartland can’t see the forest for the trees, they have their heads firmly planted in the sand. Even they have not yet come to the realization that the time of the mighty Uncle Sam$ supremacy is over.

So again I say "WAKE UP AMERICA" the US$ is toast!

By reading this and my previous missives I am sure that YOU ARE FULLY AWAKE ALREADY and have acted accordingly. If you have not acted as yet then make sure to ACT now … and BE A WINNER. Get into the commodities including the metals and especially your favorite gold and silver stocks and don’t be shy about giving your friends a wake-up call (the general public is not aware that their purchasing power is eroding in waterfall proportions). In the year to come anyone you wake up now will thank you for it.

To own some physical gold, perhaps you should open an account with James Turk at where you can trade in gold grams (important: the gold is stored in the UK and not in the USA – just in case the US gets funny ideas about confiscation again).

Last Saturday, in Chicago, James Turk told me that, on urging by myself and others, you will be, starting in the 2nd Quarter of 2005, able to buy silver on his site as well although you will not be able to trade it in grams as you can in gold since there are some difficulties in doing that.

This just in: Bema Gold and Eldorado Gold Corp raised $167.5 million dollars yesterday in separate deals on the capital markets and as Jim Mustard, stock analyst at Haywood Securities says "It show you the appetite when gold pops its head up to US$430 an ounce".

Yes, my friends US$430 is the magic number to break and the smart money, as noted in the above paragraph, already knows this is imminent (today gold, although down US$1.50 for the day at the close, traded as high as US$429.30).

By the way silver was at US$7.43 during the day but was down US$0.13 at the close as well. All I can say is "what a buying opportunity". All in all "the trend is your friend" and the trend is up. The best thing I can say "just be positioned for the long term".


Nick L. Nicolaas

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