Riches Like a Thunderclap!

If you thought last week was good for natural resource investors, take a gander at the nice little gifts the market delivered to your doorstep yesterday:

Oil prices surged to $66 per barrel … the Oil Services HOLDRs (OIH) made new 6-week highs … gasoline jumped by 2.1% … and even natural gas, the one laggard in the sector, rose in tandem also 2.1%.

Metals were down slightly, but no big deal, especially after such a nice bull run in the previous trading sessions.

And all this despite the fact that the Fed, as Tony warned you yesterday, jacked up interest rates for the fifteenth time. Heck, even the Fed is now recognizing what weve been telling you for months: Natural resources matter. Theyre adding to inflation pressures. And it could get out of hand.

After all, silver is pushing to new 22-year highs, and gold is coiling up for its rush to $600 with all the force of a volcano.

This is very exciting. And rarely do you get a chance to witness this kind of rush first hand. Has this happened before? You bet it has!

Heroes, Villains,
Disconnects and Riches

Looking back in time, rarely have I encountered a story with more heroes and villains, stunning disconnects or staggering riches than in the saga of the Australian Gold Rush.

When Britains Lieutenant Cook discovered Australia in 1770, he raised his flag on Possession Island off the coast of Queensland.

Ironically, though, it wasnt until the next century that prospectors digging on the same island since renamed Tuined found a fortune in gold. Just imagine how Australias history might have unfolded differently if Cook had dug a little deeper to plant his flag!

In fact, Australians actually went to some lengths to avoid finding gold. The continent was settled by farmers and ranchers seeking a bucolic paradise (although the convicts sent there in chains might have had a different opinion). So, discoveries of gold were quashed time and again for fear of being overrun by scum and riffraff. But by 1851, that changed drastically.

Delusional and Darned Lucky

One Australian in particular, Edward Hargraves, had sought his fortune in the California gold rush and didnt find it.

Not a tall man, he was 258 pounds of roly-poly adventurer.

To read his diaries is to read delusions of grandeur. But one thing he had right was the similarity between the geology of the California goldfields and his homeland. So, back in Australia, he went prospecting in Lewes Pond Creek near Bathhurst, New South Wales.

Somehow, he said, he felt surrounded by gold. So he panned vigorously for the yellow metal. And sure enough, he found it.

Leaving his partners to continue mucking about in the creek, he rushed off to Sydney to break the news to the authorities. If this is gold country, said the astonished Colonial Secretary, it comes on us like a clap of thunder, and we are scarcely prepared to credit it.

In grand gold miner tradition, Hargraves cheated his business partners out of their share. He then glory-hogged his way into being appointed Crown Commissioner of the Goldfields, and the Australian gold rush was on!

Within a few days, 100 miners (or diggers as they are called in Australia) were frantically digging for instant wealth in the new gold field, called Ophir. Within a couple months, there were 500. And they kept coming. It seemed as if the entire population of Australia was on the move.

From Sheep Pen to
Gold Miners Bonanza

New South Wales neighboring state, Victoria, was hit particularly hard by gold fever. Melbourne, the capital, emptied out. Schools were deserted; businesses, shuttered. All but two members of the police force quit.

Even the citys most senior officials abandoned their offices and dashed for the gold fields.

In the California gold rush, crews deserted their ships and headed for the gold fields, leaving the ships to rot in the harbor. They did the same in Australia.

Whole families traipsed off for the mining camps. And as hard as conditions were for women and children, they were the lucky ones. In many other Victoria families, fathers deserted when the gold bug bit.

Finally, desperate to avoid seeing his state turn into a ghost town, Charles J. La Trobe, the Governor of Victoria, offered a 200 reward to anyone who found payable gold within 200 miles of Melbourne.

Well, remember how I told you that the bucolic-loving ranchers of Australia had been keeping gold quiet? A bunch of them showed up to say, sure, we have gold out at our place. The rush shifted into higher gear!

In 1851, goldfields were discovered in Victoria in Ballarat, Buninyong and Bendigo, some of the richest goldfields in the world.

Bendigo was a sheep pen until gold was discovered. Then it became a tent city. Next it was a row of wooden false-fronted buildings that sprung up overnight. And soon it was a goldfield 11 miles wide with 20,000 miners digging in a wild frenzy.

A 148-POUND
Gold Nugget

Enormous nuggets were discovered more than 1,200 weighing over 20 troy ounces each!

In 1858, a gold nugget weighing 138.6 pounds thats POUNDS, not ounces was discovered in Ballarat.

Then, in 1869, the biggest nugget of them all, tipping the scales at 148.75 pounds, christened The Welcome Stranger Nugget, was discovered near Moliagul. Thats 2,284 ounces of gold in one piece!

Wealth from the gold fields poured into Melbourne. Saloons and less reputable establishments lined the muddy streets, while drunken diggers lurched from one party to the next, scattering gold dust in their wake and fending off Biddies unattached young women looking for miners to marry.

Merchants of all kinds flourished in the boom town, especially the kind that specialized in fleecing the unsuspecting.

Death, Taxes and Bushrangers

Instant wealth eluded most on the New South Wales and Victoria gold fields. The work was backbreaking, and crime was common.

The outlaws of Australia, Bushrangers, were originally escaped criminals. But the forced transport of criminals to Australia ended in about 1853. Thats when gentlemen started paying their life savings for the same voyage just to buy a chance in Australias gold fields.

The bushrangers went by colorful names like Captain Moonlight and Captain Thunderbolt.

One, Owen Suffolk, robbed his victims smartly dressed in a black suit of fashionable cut and black kid gloves. But while some of these men were proud of their gallantry, the rest were by and large among the most desperate and cruel scumbags ever to walk the earth.

Sometimes they tie their victim to a tree and leave him to the ants, mosquitoes and hunger, goes one account, Very rarely is the unfortunate found in time. More often one finds a skeleton tied to a tree.

Brutality aside, one thing they were very good at was robbing the gold escorts, teams of horses and armed men that made the way from the far-flung fields to the banks.

Sometimes their own greed did the bushrangers in. One-Eyed Tom Wilson robbed several thousand ounces of gold at Mt Alexander. He bought a pub in Hobart and began robbing diggers who were his guests, and eventually landed back in the stir.

Hang em, Drown em,
Shoot em or Flog em

Claim jumpers were rampant, and ownership of claims was settled by brawls or a pick-axe in the back. Vigilante committees were organized to decide what to do with the more wretched lawbreakers hang em, drown em, shoot em or flog em.

Yet despite toil and mayhem, immigrants with gold in their eyes continued to flood into Australia, many making the 2 -month journey by clipper ship from Britain. They werent complaining. Before the ultra fast clippers came along, the journey could take up to seven months!

The impact on Australias population and economy were far-reaching:

At the beginning of 1851, the population of Victoria stood at around 80,000. By Christmas, new arrivals with gold fever had swelled it to over 97,000. By Christmas the next year, over 168,000 people packed the city. A decade later the towns population had risen to over 500,000.
In 1852 alone, 370,000 immigrants arrived in Australia.
The total population of Australia increased from 430,000 in 1851 to 1.7 million in 1871 a THREEFOLD increase in 20 years.

In short, Australias gold rush shaped the country.

The First Chinese in Australia

One large group of immigrants came from China a shocking turn of events for a country that had Whites Only immigration laws until 1973.

The vast majority were men who came to work, not to stay.

And their reception was as jagged as the rocks of the Victoria coastline: They were treated with all the graciousness one expects of a Victorian-era colony racism, poll taxes, muggings and mob action.

The Chinese were resented because they seemed to be very good at finding gold (A Chinamans Chance), and used innovative techniques to get it.

For instance, the gold region of Western Australia is a bone-dry desert it rains only seasonally, meaning there isnt enough water to separate the gold from the dirt. So the Chinese would dig up ancient, gold-rich creek beds and pile the sod up vertically. Then theyd wait for the seasonal flooding rains to come and do their work for them.

But even more resented than the Chinese was the Miners License which was required to work a claim. The monthly fee of 30 shillings for each claim was tough to pay in hard times and the claims were only 12-foot square on the surface, which made them difficult to work. The licenses were strictly enforced, and had to be on the diggers person at all times. Violators were chained to a log until their cases were decided.

The miners actually resented this so much it led to rebellion. An Irish engineer named Peter Lalor and some companions organized 120 miners at Bellarat and built the Eureka Stockade.

The government promptly marched in troops and shot the place up. Over two dozen died or were seriously wounded, and the survivors were hauled off, their leaders charged with treason.

But in a stunning display of democracy in action, the jury refused to convict, and popular sentiment forced the government to agree to all the miners terms.

Within a year, Peter Lalor was elected to the Victorian parliament minus an arm hed lost at the battle of the Eureka Stockade. The shots fired at Eureka echoed throughout the Australian government, sparking a move toward less taxation and more freedom from government control. In this sense, gold even shaped the Australian democracy.

And that same gold also helped pay for the industrialization of England and Europe: During its gold rush heyday, Victoria produced 25 million ounces of gold, representing 87% of the total Australian production and a whopping 35% of world production.

But Victoria wasnt the end of Australias gold rush. One Australian state after another had its own gold rush. And the gold rush in Western Australia didnt start until June 1893 42 years after Hargraves found the first glimmers in a pan in New South Wales.

The Energizer Bunny
Of Gold Rushes

This, to me, is the big lesson of the Australian gold rush under the right circumstances, a bull run can go on and on and on. Like the Energizer Bunny.

From Victoria, the gold fever spread to other parts of Australia. Many Australian gold discoveries were worked well into the 20th Century.

Since then, new finds have continually been made. Australian gold miners and engineers spread out into silver, copper, zinc and uranium. And in recent years, theyve been exporting their expertise leading the hunt for gold in Asia and even Africa.

But whats really got me pumped up is not the distant or recent past. Its the immediate future: My strong hunch is that Australias next rush for riches is starting right now, and that you can make a fortune on it.

Red-Hot and Ready to
Roll In Just 5 Days

I launch my new service dedicated to Asia and Australia five days from now. Heres what Im looking to recommend with my inaugural issue:

One Australian company is sitting on an estimated 8 million ounces of gold, 100 million ounces of silver, nearly 4 million tons of copper and 1 million tons of zinc. Thats about $14 billion in metal in the ground at current market prices. And yet judging by its share price, its assets are valued at a meager 14 cents on the dollar. Cheap!
Another company run by Australians is busy digging up the treasures of Asia. Its sitting on AT LEAST $5.3 billion worth of copper and $1.1 billion worth of gold in the ground. And yet judging by its share price, its resources are valued at just 2.3 cents on the dollar. Even cheaper!
And gold isnt the only resource that will make Australia rich. Another company is sitting on more than $7.3 billion in uranium thats valued at 33 cents on the dollar.
Have you seen the way that uranium has soared in the last year? But this bull run is only just beginning. The nations of the world are playing catch-up to build nuclear reactors before their oil supplies dwindle. Uranium prices are going to the moon, and this stock should go along for the ride.

The more I look at Australia and the rest of Asia, the more excited I get. We are in a commodity supercyle, and the companies that are going to feed it for the next decade or more are like diamonds in the dust bin, waiting to be picked up for pennies on the dollar.

Ill be making my first recommendation in 5 days. Ill pick out THE most exciting opportunities from my research, wrap up my reports, and send them out to subscribers to Red-Hot Asian Tigers on Monday, assuming market conditions are OK.

So readers who are interested need to be on board by Sunday, April 2nd. Otherwise, they may miss out. Click here for details.

Yours for trading profits,

Sean

For more information and archived issues, visit http://legacy.weissinc.com.

About MONEY AND MARKETS

MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Jennifer Moran, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.

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