August 19, 2004Dear Sir or Madam:We at Sprott Asset Management Inc. (SAM) have taken an active interest in gold andgold shares since the onset of the new bull market in the sector, which began at thebeginning of 2001. We believe gold is well launched into a multi-year bull market for anumber of strong fundamental reasons. In fact, we would go so far as to say that thefundamentals may well be better today than they were in the seventies when goldexperienced a historic twenty-fold move in price. Our approach at SAM has always beento seek out situations that offer terrific risk-reward relationships and invest in themaggressively on behalf of our clients. We have considerable experience in this regard andhave enjoyed a reasonable amount of success.First and foremost, we are money managers. We certainly do not look upon ourselves ascrusaders, but the more we investigated the gold market, the more readily apparent itbecame that the gold price appeared, in the politest of terms, to be managed. In fact, theprice action seemed in many instances to be counterintuitive. On days when there wereparticular reasons for gold to rise, it often actually declined or was aggressively capped if the buying pressure proved to be too strong.The mere suggestion of gold price suppression draws ridicule from the detractors of goldwho deride any notion that the gold market is anything but totally free. The words thatevoke the strongest emotions with respect to this issue are “conspiracy” and“manipulation”. A gentleman by the name of Brian Bloom attempted to explain thesituation in a recent essay in which he stated, “I want to differentiate here between themeaning of the word ‘manage’ and that of the words ‘conspiracy’ and ‘manipulate’. Thelatter are emotive words that imply joint clandestine action, or anti-social behavior,whereas ‘manage’ implies joint overt and legitimate action”.
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He then went on to add that“there is no secret that the world’s central bankers are involved in ‘managing’ markets”
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,suggesting that they were acting in the best interest of society and therefore their actionswere justified. While appreciating Mr. Bloom’s attempt to clarify the matter, we at SAMare not terribly interested in semantics, believing that markets are either free or they arenot free, irrespective of what terms are used to describe their lack of freedom.
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Brian Bloom,
Managed Markets
(July 30
th
, 2004):http://www.gold-eagle.com/editorials_04/bloom073004.html
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Ibid.
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