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THE GOLDEN POT gold news & views - charts & more not so much a forum but rather a news archive

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Gold -- Sharefin, 03:07:02 01/27/03 Mon

French and Scottish Journalists Write More Sense About Gold Than The UK Media

Fascinating to see positive articles in French newspapers such as La Tribune and Le Figaro about gold, while British journalists steer well clear. Typical of the Brits is the Daily Mail with the throwaway comment, “The days when gold dominated the UK market are long gone,” or the Financial Times which is meant to set an example in such debates, saying simply that “the looming threat of war in Iraq helped sustain buying interest in the metal.” Agreed, there are exceptions. The Times ran a piece saying that net investment in gold by individuals is soaring and it is not unusual to see people walk into banks in European countries and buy 10 kgs of gold in bars which they then stuff in their ruck sacks.

The level of debate as to why they should do this and why the price of gold is on the move is, however, limited. “The movement is largely due to a reduction in supply by the big mining companies, coupled with increased buying by hedge funds and other professional investors” is as intelligent as it gets. In fact it has been the Scotsman which is the only UK newspaper which has got to the nub of the issue with an article entitled, “Why gold is gaining in a world awash with dollars.” Ian Lamont, who is an Edinburgh based commentator and former stockbroker says, “The dollar has been able to remain fundamentally and seriously overvalued for years because the rest of the world was gullible enough to believe that the US economy would always overperform and thus its bonds and shares deserved a premium rating.”

He continues, “ Some 75 per cent of central bank reserves, plus a great deal of non-US private wealth, is held in US dollars. Now that the Fed has declared it will ‘print’ as many dollars as it takes to combat deflation, holders of US dollar assets will have to be extraordinarily naïve not to realise that an unlimited increase in the supply of US dollars means dollars will inevitably be worth less….. There is one standard against which this debasement of currencies can be measured and one asset which investors can own to protect themselves: that standard and that asset is gold.”

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Gold -- Sharefin, 02:38:12 01/27/03 Mon

The Great Bear Market In Gold Lasted So Long That Only The Old And Bold Remember The Last Bull Market

“With age comes Wisdom”, or so one hopes. And with wisdom comes the realisation that things are never quite as they seem to be and the best way to analyse the future lies in a study of the past. This may appear as a bunch of truisms, but apply them to gold - its past and its possible future- and a few things fall into place. Why, for instance, do so many commentators glibly attribute the present revival of the gold price to the possibility of war in Iraq?

As a variant today the Financial Times Markets Report put it down to ‘speculative buying’. This was pinned on a comment from a Mr Jeffrey Christian of CPM Group suggesting that speculators were betting that people who sold the February Comex Futures contract would find it hard to buy the physical gold needed when this contract becomes deliverable on January 31st. Well it is a point, but it can hardly be held responsible for the fact that gold rose by nearly US$10/ounce last week and by US$5 the week before. It has now broken through a high point last reached in 1997. But just to show that the Pink’Un doesn’t give a toss for the gold story one way or the other, it is now going to be without a mining editor as Matthew Jones is moving to an editing job on world news there and no one is lined up to take his place.

On the same day the newspaper carried a piece saying that hedge fund managers have been switching out of falling equity markets and into commodities, particularly gold. John Reade, a precious metals analyst at UBS Warburg was quoted as saying that this switch in policy is confirmed by the fact that there are a record number of positions on the Comex gold contract in New York. He then went on to claim that there is a war premium of US$30 to US$50 in the present price of gold. It would be interesting to know his reasoning. Yes, there was a price spike at the time of the Kuwait war, but things were very different then . Equities were booming and the dollar was strong. Hardly the sort of conditions on which gold thrives.

Maybe the answer is that most of these commentators and analysts have never seen gold on a bull tack before. They have been brought up on a diet of paper currencies interspersed with assurances that gold has had its day. Looking back over the past 23 years to January 1980 when bullion topped out at US$800/oz, it has been in a basic bear market ever since with exception of a few spikes such as the one caused by the Washington Agreement on Central Bank sales. Traders and advisers in any market that maintains the same trend for such a period are bound to assume that it will last forever. Out of that grew the view that gold had had its day. When analyst Andy Smith of Mitsui Precious Metal changed to a bull last year it was easy to see that it caused him real pain as it went against the grain. Even now he finds it hard to maintain a bullish stance and has fallen back to talking in riddles.

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Gold -- Sharefin, 01:58:57 01/27/03 Mon

Nuts And Bolts

Why is gold rising?
There has been enough literature put out recently, if you have been paying attention, to come to the conclusion that it's not because of the threatened war with Iraq. As a matter of fact, I would hypothesize that a war between the US/Britain and Iraq may occur, because gold is going up. It's the old chicken/egg conundrum, and you should endeavour to become aware of which is first, if you expect to keep your financial nest egg in tact, going forward.

Indubitably, I think it is becoming increasingly important, as the gold bull market progresses, for investors to make themselves aware of the actual 'nuts and bolts' of why gold is rising. Having a firm understanding of the actual underpinnings of the process that is currently unfolding will increase the probability that you will not misread the real reason(s) gold is ascending in price, and keep you where you should be under these conditions, invested in gold and it's related equities.

In a nutshell, gold's recent rise, in US dollar terms, has everything to do with the currency. More specifically, it has everything to do with the money supply. Baring in mind that this analysis is going to be relatively straight forward, as in order to present a comprehensive accounting of all the factors behind gold fundamentals, as it relates to money supply, would necessitate an examination of the behemoth's historical price sensitivity to relationships such as those found in phenomena like 'Gibson's Paradox'. For the purposes of this essay, we will refrain from such expeditions, and get down to what I consider to be the real 'nuts and bolts' of the matter.
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If my channel lines are drawn correctly, gold may have already given us the signal that we are about to take out the 1996 highs, as it has entered a new growth channel. If gold can close above the $365 level, for three consecutive days, it has a good chance of running up to the $400 to $425 area very quickly. Lets keep our fingers crossed on that one.

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Gold -- Sharefin, 01:52:14 01/27/03 Mon

Sparkle Or Shine, Gold Still Glitters

Investment in precious metals jewellery and precious and semi-precious stones jewellery is not only the game of disposable income on a personal level, but also culture and heritage.

The World Gold Council (WGC) profiles the appeal gold has in Indian society. "Its demand cuts across age, gender, geography, and social and economic class. Gold is desired by businessmen and their wives; it is coveted just as much by farmers and their wives. For centuries, the only method of saving that was known to Indians in the villages and small towns was gold. Even with the availability of new financial products in the market, gold remains an integral part of the investment portfolio of many Indian families. It comes good in times of economic and political uncertainty, as is borne out by its performance last year when it delivered a return of 20 per cent in rupee prices from January 1, 2002 (price per 10 gms of standard 24K gold in Mumbai was Rs 4,640) to December 31, 2002 (price per 10 gms of standard 24K gold in Mumbai was Rs 5,580)," reads a statement issued by the WGC.

It is this neverdying lust for gold and jewellery and, of course, your kitty of disposable income that almost everyone in the trade and industry is chasing.
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Thus, for a lay man or an avid investor, it is really confusing as regards to what one should opt for, keeping in mind the two main aspects of investments - safety and resale / return value of investment while keeping with the trends and fashion of the times.
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Among the three main players, it is the WGC which is the most aggressive on this front, as WGC’s associate director (Jewellery, India) Hiroo Mirchandani says, "India’s gold demand cannot be taken for granted."

A check of the markets in New Delhi and Mumbai reveals that gold still wins hands down. Buyers and sellers still back the yellow metal for one main reason -- it fetches the best returns at the time of resale.
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Yet, Mr Verma believes gold is the best investment. "After all, there has been a 30 per cent jump in gold prices in the last two years. In fact, I expect the price of 10 grams to cross the Rs 6,000 mark in the next 15 days," he says.

WGC’s Hiroo Mirchandani has facts and statistics to support gold. "In India, 72 per cent of the population lives in rural areas and depends on the monsoon for its livelihood. There is limited availability and knowledge of financial products, widespread poverty, no social security net, and a vulnerable currency alongside exchange control. Here, gold jewellery, which makes up 90 per cent of gold consumed in India, has been viewed as an important family investment for decades."

Ms Mirchandani feels gold is a safe instrument because of its low risk, reliable store of value. "It is an excellent portfolio diversifier, and an asset of last resort in times of uncertainty, because of its high liquidity which can be converted to cash in case of emergency," she says. "Banks, cooperative banks, moneylenders and pawnbrokers, all accept gold jewellery as security for loans."

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Gold -- Sharefin, 01:30:59 01/27/03 Mon

For now, the outlook for gold is golden

War worries generated a lot of ugly financial numbers last week. The stock market sunk and the dollar piled up an unprecedented nine-day losing streak against the Euro.

Then there was gold, the shining investment story of 2002 that continued to advance and reach a six-year high last week. Gold for February delivery climbed to $368.40 by Friday, the highest closing price on the spot market since the end of 1996.

Gold thrives on anxiety and economic uncertainty. The threat of war, especially a conflict that lacks support from American allies, qualifies in spades. Gold prices, up about 25 percent last year, have gained another 5 percent this year.

So here's a fair question: What would happen to gold if we all woke up tomorrow to discover Saddam Hussein living in exile somewhere other than Iraq? Crisis over.

The short answer is easy, gold prices would take a big hit. An answer covering a longer period of time - the balance of the year or over the next few years - is more interesting.

I asked several professional investors who are also gold fans to estimate the temporary effect of war jitters on current prices and got mostly consistent answers.

''The war premium is maybe $15 to $20,'' says Boston hedge fund manager Paul Stuka of Osiris Investment Partners. ''At some point, will that come out? Absolutely.''

The biggest number I heard was $30 per ounce. No matter, it's clear gold prices will take a significant fall whenever Iraq ceases to be the worry it is today.

But gold fans believe in a secular, longer-term bull market for the metal that did nothing but disappoint its owners over 20 years. The two keys: currencies under pressure, and basic supply and demand.

Reflation, an economic buzzword for the new year, is the development that would boost gold prices. Gold bulls believe central banks in the United States and elsewhere, worried over the threat of deflation to their currencies, will ''reflate'' by printing more money. That would lead investors to move more of their money into hard assets.

Stuka notes the current gold rally that began in November wasn't triggered by any war-related developments. He points to a speech delivered at the time by Federal Reserve governor Ben Bernanke, laying out steps the Fed could take in the unlikely event Japan-style deflation did occur. Fed chairman Alan Greenspan brought up the subject of deflation in unusually blunt public comments the next month.

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Gold -- Sharefin, 01:26:12 01/27/03 Mon

As alternative investment, gold's future looks bright

After watching the value of his stocks sink for three years, Ken Jensen began 2003 looking to diversify his portfolio by considering a long-forgotten investment.
His search led him far from his stockbroker's office to Harlan J. Berk Ltd., a coin and collectible shop in Chicago's Loop. There, on the second day of the new year, Jensen went shopping for gold.

"Well, the stock market keeps going down," said Jensen, a 55-year-old Chicago business executive. "I invested in gold a long time ago. I thought it was time to revisit it."
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"Nobody believes it," Holmes said, referring to last year's price run-up. "That's the most positive part."

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Gold -- Sharefin, 01:20:35 01/27/03 Mon

Suit says collusion robbed gold of its luster

Two years ago, a leading New Orleans gold executive, stumped over the low price of gold, stumbled onto what he saw as a scheme to manipulate its price by one of the world's biggest and most politically connected precious-metal producers and an old-line Wall Street investment bank.

In the post-Enron world, hedging, derivatives and off-balance sheet accounting are no longer dry financial numbers but the stuff of collusion and conspiracy, with the result that New Orlean's Blanchard and Co. filed an antitrust lawsuit against Barrick Gold Corp. and J.P. Morgan Chase.

The suits accuses them of suppressing gold prices in the past to profit by short-selling and acquiring mines on the cheap.

Barrick, which runs a far-flung network of gold mines in North and South America, Africa and Asia from its Toronto

headquarters, dismissed the complaint as ''ludicrous and totally without merit'' when it was filed on Dec. 18. J.P. Morgan did not return a telephone call.
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The Blanchard lawsuit alleges that Barrick's price manipulation has netted it $2 billion. The gold producer negotiated ''pot-deferred sales contracts,'' derivative contracts through which a bullion bank, acting on Barrick's behalf, borrows gold from a central bank at a lease rate of approximately 1.5 percent and sells that gold into the spot market.
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A derivative is a complex financial instrument that derives its value from something else, such as a bet that interest rates will stay low. Companies use derivatives in transactions like currency hedges to guard against an abrupt change in exchange rates.

But derivatives like interest-rate bets are dangerous because they grow exponentially when interest rates rise.

But Barrick also had a hedge in its derivative contracts. If gold prices go down, Barrick has negotiated a higher price.

But if gold prices rise -- always the big danger in such derivative operations -- Barrick's special contracts allowed it to postpone repayment of the borrowed gold, sell its own gold production for the higher spot rice and repay the loan when the gold spot price falls, according to the lawsuit.

So a contract that allows Barrick to postpone judgment day if gold prices go up is quite unusual. Some of Barrick's deferred sales appears as off-balance sheet assets.

Blanchard's lawsuit alleges that this type of derivative contract is illegal, violating anti-trust laws.

''It is an anti-competitive and anti-trust violation,'' said Neal Ryan, Blanchard's spokesman. ``You have one company that is allowed to trade at no risk, never having to cover or lose. It automatically changes the playing field for other gold companies. No other gold company has these advantages.''

Barrick was a bit player in gold when it was incorporated as a Canadian company with one mine in 1983. Twenty years later, after a flurry of acquisitions as other companies dropped out in face of declining prices, it is the second-largest gold producer in the world.

The captains of world power have traipsed through its boardrooms. Former President George Bush, the father of the current president, has been a special advisor. Former Canadian Prime Minister Brian Mulroney sits on the board. Former presidential confident and lawyer Vernon Jordan, former Senate majority leader Howard Baker and former German Bundesbank President Karl Otto Pohl have also been on the international advisory board.

J.P. Morgan has not escaped scrutiny in this. Speculation that the bank had billions of dollars in gold derivative exposure traveled on the Internet, prompting the bank to announce that it had asked the Securities and Exchange Commission to investigate these rumors.
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Please note the reaction of gold to the announcement of this law suit.
Gold voted affirmative with a $20 rise.
Now that is saying something...^o-o^....

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Gold -- Sharefin, 00:58:24 01/27/03 Mon

Hoarding Raises Gold Price

Investors with idle money are increasingly choosing gold rather than housing, a trend that has raised the price of the valuable metal and encouraged smuggling.

According to sources in Chongno, where around 3,000 jewelers are concentrated, big "hands" have been buying up large quantities of gold, sometimes spending hundreds of millions of won at a time.

The rising demand has pushed up gold prices. The precious metal was selling at 54,000 won per 3.75 grams last week, the highest price since the financial crisis in late 1997.

The Korea Jewelers Association forecast the price will rise further, even after the Lunar New Year holidays. "The looming war in Iraq has pushed up gold prices, while the stock and housing market, the traditional destination for investors, remain unprofitable. These factors are directing investment to the gold market," a market observer said.

But the rising demand has also prompted gold bar smuggling. According to the Korea Customs Service (KCS), the amount of gold seized last year skyrocketed to 156.1 billion in 39 cases, approximately 40 times more than 2001.

"Most of gold circulated in the market is probably contraband," a KCS official said.

A salesperson at a jewelry shop in Chongno said, "On average three or four people visit us daily to purchase as much as a hundred million won worth of gold. Most of customers are housewives in their 40s or 50s."

A middle-aged housewife visiting a jewelry shop said, "The gold market has begun to be a popular target for return-minded investors, even more popular than stock or real estate."

Market insiders estimated jewelry shops in Chongno deal in between one and two billion won worth gold every day.

"The trend reminds me of the fact that the wealthy went out to hoard gold during the financial turbulence in late 1997. It was a big contrast with middle- and lower-class people actively participating in gold-collecting campaigns to pay off nation's debts," a professor in Seoul said.

"When the economic outlook is unclear, it is not very appropriate for some wealthy to make a corner in a particular item," he added.

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Gold -- Sharefin, 00:52:42 01/27/03 Mon

Have investors missed the gold rush?

I assume most investors are aware that gold stocks and the related precious metals funds were the top performers for the second year in a row last year.

The top precious-metal fund was the Royal Precious Metals fund with a one-year return of 153 per cent, which was well above the average gold fund return of 75 per cent.

Precious-metal funds tend to be small in size because of investor skepticism. That's because gold still has a bad reputation, due in part to past volatility and the "chicken little" image of gold investing. In reality, gold investors do not have to fearful of the collapse of our Western economies - they may simply wish to diversify their portfolios.

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Gold -- Sharefin, 00:48:38 01/27/03 Mon

Gold Oil and War

The obvious drive of oil and gold to higher prices under
the flowering drum song of war, suggests some fundamental
economic issues that have threaded through society
for at least the last couple of centuries.

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Gold -- Sharefin, 00:34:23 01/27/03 Mon

Buy central fund if you want gold in your RRSP

Less risk than gold stocks

Question: May I hold gold bullion inside an RRSP?

Answer: Gold, silver and other precious metals in any form, for example, bars or certificates, are not qualified investments for RRSPs, however there is still a way to own gold in registered accounts without directly buying gold mining shares, says Peter Boronkay, an investment executive and certified financial planner with ScotiaMcLeod in Vancouver.

According to Mr. Boronkay, the Central Fund of Canada Ltd., founded in 1961, provides a low-cost alternative to purchasing bullion on a personal basis and is the only bullion investment that qualifies as Canadian property for RRSPs.

The fund is strongly correlated with the price of gold, with less risk than gold mining shares, and the fund has a conservative management team with a 40-year track record.

The fund's assets are split about 56% gold, 42% silver, 2% cash.

Gains on sale of fund units are treated as a capital gain, while sales of bullion may be treated as income. As well, the fund pays a 0.25% dividend.

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Gold -- Sharefin, 00:28:53 01/27/03 Mon

Miners glitter in Vancouver maneuver

Gold explorers seen poised for further gains
In yet another sign that bullion fever is spreading across North America, a Canadian conference organizer expects more than 2,000 people to attend a weekend gold show.

The Vancouver Gold Show presents what some regard as the riskiest companies in the gold trade -- Canada's crop of tiny minerals miners. On Friday morning, the scrappy miners' shares were afire, with some, such as Navigator Exploration (CA:NVR: news, chart, profile), up 6 percent in a day and almost 50 percent in a week of Canada-based trading.

As gold surpasses $365 an ounce for the first time in six years, and platinum near a 17-year high of $650 an ounce, investors, bankers, analysts and ordinary folk are showing renewed interest in the exploration sector. The value of small mining companies is double, triple and, in some cases, 10 times their worth of two years ago.

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Gold -- Sharefin, 00:23:49 01/27/03 Mon

Gold soars to six-year high

Gold, the investment haven, soared to a six-year high of $US368.25 an ounce in New York on Friday night, as investors dumped shares and the US dollar as war lurched closer.

Friday night's $5.20 an ounce rise in the gold price took the gain this year to $20.20 an ounce, or 5.8 per cent. Commodity analysts believe gold could hit $400 an ounce should war break out, but believe it will fall back to between $330 and $350 an ounce once these immediate tensions have been resolved.
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Commonwealth Bank commodity strategist David Thurtell said Iraq had played a big part in the latest rally. Growing concern over North Korea had also given gold a push, he said, since many of the big users of gold were in eastern Asia - India, China, Indonesia, South Korea, Japan and Pakistan.

"Gold trading is usually fairly quiet in Asian trading time but in the last two months we have seen some quite big movements," he said. "North Korea seemed to set it off."

Mr Thurtell said the weakening US dollar had also underpinned the rally, as it made gold more attractive to non-US buyers, while falling global sharemarkets had also prompted investors to move out of shares and into the precious metal. "The planets have all lined up for gold in the last two months," he said.

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Gold -- Sharefin, 00:15:13 01/27/03 Mon

Gold To Be Remonetized!

First by the "Malaysian Dinar" June of 2003, the "US Dollar" will Follow June of 2004: The Gold Price Will Continue to Float

On December 23, 2002, I wrote an article for the gold community reviewing the presentations made by Chairman Greenspan and Bernanke, a Governor of the Federal Reserve. I concluded that gold will be remonetized for the dollar by a revitalized and modernized Federal Reserve Gold Certificate Ratio. In my opinion, this development is, without a doubt, final proof that this current bull market in gold is generational, not secular. When Chairman Greenspan referred to the period of time since Chairman Volcker took anti-inflationary action, late in 1979, by saying, “We have come full circle,” I believe he was referring to the entire scenario. That was during the Nixon administration when gold exited the dollar. Now gold will be used to revitalize both the economy and the dollar.

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Gold -- Sharefin, 00:07:47 01/27/03 Mon

$372 Then Between $410 & $420 - War Premium or Economic Impetus?

What a world of contradictions.

Elliott practioners are pounding their chests saying. "We told you so, maybe." Gold stock traders are gold bears. Others ask, "Gold is over $354, so where are the derivative bankruptcies?" The stock market is suffering from acid reflux. Remonetization is being discussed openly in North America and Great Britain. So what in the world does all this mean?

What this gold-related cacophony means is that, as always, bull markets must climb a wall of total disbelief. The total flux in the gold community is a phenomenon common to the infancy of any bull market. So why would you expect anything but this? Let’s take these apparent contradictions one at a time.

We have talked Elliott almost to death. Let me just say that I did not have a single person accept my offer of a $100,000 legally binding wager that gold would trade above $400 in 2003 when we broke out of the Teacup. I actually expected to hear from Mr. Prechter, but was greeted only by total silence. Not one Elliott practitioner out there would lay down their funds on that wager. So, I have to assume that they are all noise and furry without substance. I believe in myself. Wagering on that belief causes me no concern. We do it every time we take a position of merit and size. So why not accept a wager on a market outlook? The answer is probably because the Elliott followers do not trade and are only talk. Most of the time, those that advise others financially cannot trade their way out of brown paper bag. I know most of them, and with the minor exception of Harry Schultz and Ira Harris (former partner and talking head on Bloomberg), you can take what I just said to the bank. I suspect this may be true in the great Elliott predictor of gold’s demise at $360. The evidence certainly suggests it.

Gold Share Lethargy

Unfortunately, the gold share traders appear like lemmings. If they aren’t jumping off a cliff, they are bouncing off the walls for sport. They look at bullion and just say, “No.” They have been bears from $354.50 to present. If they stay true to form, they will turn violently bullish at just the wrong time. True, there is precious little to select from in the gold and silver public companies that qualify as value in terms of ethics and being shareholder friendly. True, it is hard to buy a significant position in a gold producer who is massively short of gold either by decision, by contract requirements of a non-recourse loan, or by having made the acquisition from hell. But among the mountain of strange fellows, there is value out there. I caution those that are declaring non-confirmation between the gold price and gold shares. Gold is fine, although gold shares/companies are typically a mountain of questionable entities run for the benefit of management. Personally, I have built my own company because I do not know anything out there I am willing to own millions of shares of. Do you really? They are laying out huge shelf offering. Some have changed their accounting rules to hide the economic results of derivative hedging from obvious view. Others are charging their derivative losses against individual projects correctly, but suggesting technical difficulties with the projects for the resulting bad performance. It is the derivative debit that is causing the decrease in economics of the project -- not a mining cost factor as suggested. Another factor for the lethargy of the shares is the nature of the new gold trader. The new gold trader is simply opportunistic, without understanding gold, flitting with every market opinion. Given a poor selection of companies in an environment screaming for stockholder friendly transparency, what do you expect?
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Derivative Dealers in Trouble

Where are the derivative dealers that are supposed to be killed by gold above $354? Well, they are where they are supposed to be, getting killed. Do you not know how to recognize a short squeeze in the making? Can’t you see the fight at the close to keep the settlement price down so as to ease the margin calls on the short? I told you when the commercial interest makes a mistake, that it is one hell of a mistake. Do you think all those commercial shorts are happy tonight? Wait until next week! Do you think that when Enron knew they were in trouble, they hung a sign out saying so? No! They spoke to bull the Enron shares as they sold their own shares. So why do you expect a major gold cartel member to announce they are being crucified? Just look at what the market did when it closed over $305 and over $354. So do not swagger around saying derivatives mean nothing. So far they have meant $371 today minus $305, which is $66 for the gold price. I gave you those two prices and explained what they meant and then the arguments started. Look at the result and stop arguing. The derivative dealers are in real trouble. Next week I will tell you why I believe those derivatives are the greatest exercise in self-delusion since the tulip craze, but we will hold that for another day.
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Conclusion: Gold’s first target as given is $372. We got $371 today. Gold’s next target is between $410 and $420. Keep in mind that unless changed for practical business reasons, the Elliott Wavers that have the gold share traders petrified, yells uncle officially at $401. The wavers will probably change the number because declaring “uncle” after terrifying the elder gold community members cannot be good for business.

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Gold -- Sharefin, 23:56:08 01/26/03 Sun

Mining giant to lose control

China National Gold Corp. is likely to lose control over 95 percent of the country's gold mines as a result of the central government's plan to separate government administration from state-owned enterprise management.

The mining giant currently controls about 1,200 gold mines nationwide under a concession which was given in 1979 to manage gold mining and smelting operations.

Under its authority the company could license new mines and provide policing against illegal gold trading.

The State Economic and Trade Commission, however, decided to withdraw those functions.

Under a proposed new name as China Gold Group Corp., National Gold will retain operation and management over 56 gold mines, including 45 wholly-owned plants. For the rest, it already holds a majority stake.

The 56 mines account for 20 percent of China's total gold output, which was estimated to exceed 190 tons last year.
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National Gold is also planning an initial public offering in April through one of its arms, Zhongjin Gold Corp. It will be the first gold mining company in China to sell shares publically.

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Gold -- Sharefin, 23:49:47 01/26/03 Sun

Shorts Attacking the Gold Miners

Many gold investors have noted, with consternation, at the divergence between the price of gold and the performance of the gold mining stocks. Gold has generally been trending higher while the miners are going nowhere. The theory goes that the miners lead the price of gold but that doesn't seem to hold water here as gold keeps heading north.

So why the divergence? Perhaps the answer is in the high levels of short-selling in the miners. Most gold investors are aware of the shorts on the metal itself and the hedges that some of the miners hold. For some reason, there are shorts attacking the miners too. Perhaps they think that there is too much euphoria in the gold miners or that the gold miners are a good area to short because they've risen so much. Or perhaps an an entity doesn't want a lot of people bidding up the miners which would take attention from tech stocks where executives exercise huge numbers of options when prices rise. And heavy shorting can drive down the price of a stock.
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Strangely enough, a large rise in the number of shorts can be bullish because it can result in spectacular short squeezes where shorts get panicked and cover at market driving the price higher and higher. I look forward to that happening in the miners when earnings reports come around. And not having a lot of shorts can be bearish as there aren't shorts that become desperate to buy at market. Of course gold is in a bull market so these stocks should trend higher with the price of gold as earnings will grow with the price of gold.

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Gold -- Sharefin, 23:48:26 01/26/03 Sun

Posted at the Bullion Bar
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Turning the corner in Gold -- Patriarchi Sam, 12:19:23 01/26/03 Sun

The corner has been turned in the Gold market, just as the corner was turned by silver 20 years ago. What no one has keyed in on, is that the profits in Comex gold of the longs, is enough (if they take delivery) to propel gold much higher (limit up for over 20 days). If long comex holders accept delivery of only 18% of their positions, the game is over, and COMEX is finished.

Have a good day

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Gold -- Sharefin, 23:43:59 01/26/03 Sun

Gold prices hit six-year high as investors seek haven in event of war

Gold prices rose to a six-year high Friday as stocks dropped, increasing demand for the metal as an alternative investment. A weaker dollar made the dollar-priced metal cheaper for buyers using other currencies.

Gold prices have climbed 5.8 percent this year, extending a 25 percent rally in 2002. Increased concern that the United States will attack Iraq to force disarmament helped prolong the rally by sparking demand for the metal as a haven.

"This is not just the speculators moving into gold; we're seeing new investment," said Dan Vaught, an analyst at A.G. Edwards & Sons Inc. in St. Louis.

"When people see the Dow down again after three years of consecutive drops, the bigger surprise would be if people didn't go into gold."

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Gold -- Sharefin, 23:33:27 01/26/03 Sun

Strong rand hurting South African gold miners

South Africa's top three gold mining firms are expected to post mostly flat to lower earnings in the three months to the end of December, hurt by a lower rand gold price after the domestic currency strengthened.

A plunge in the value of the rand at the end of 2001 to a low of 13.85 against the dollar, and a 25-percent rise in the gold price, propelled profits of most South African bullion producers to record highs early last year.

But the rand appreciated by nearly 40 percent against the dollar last year, translating into a five-percent decline in the average rand gold price received in the quarter under review, analysts said.

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Periodic Ponzi Update PPU -- $hifty, 23:24:51 01/26/03 Sun

Preiodic Ponzi
Update PPU


Periodic Ponzi Update PPU

Nasdaq 1,342.14 + Dow 8,131.01 = 9,437.15 divide by 2 = 4,736.57 Ponzi

Down 244.89 from last week.

We just may see the elusive sack of potato's formation this week! <:-0

Thanks for the link RossL


Go GATA !
Go GOLD !

$hifty

---

Gold -- Sharefin, 23:16:21 01/26/03 Sun

Private placement for Central Fund of Canada

Central Fund of Canada Limited announces that it
has entered into an agreement with a major Canadian dealer to sell, subject to
stock exchange approvals, on a private placement basis 3,500,000 Class A
shares for aggregate gross proceeds of U.S. $15,295,000. The shares are being
issued at a non-dilutive price of U.S. $4.37 per share, being approximately
Cdn. $6.71 at the exchange rate of 1.5350.
Of the net proceeds of the offering, U.S. $13,624,200 will be used to
purchase an additional 22,400 fine ounces of gold and 1,120,000 ounces of
silver with approximately U.S. $800,000 retained, after expenses of the issue,
as working capital.
The new total of issued and outstanding Class A shares of Central Fund of
Canada Limited will be 39,297,520. After giving effect to this offering, the
holdings of Central Fund will be represented by approximately 261,328 fine
ounces of gold, 13,066,381 ounces of silver and approximately U.S. $3,875,000
primarily in cash.

---

Gold -- Sharefin, 23:14:01 01/26/03 Sun

How they put a price on gold

IN A SMALL, wood-panelled room in the heart of the City, a bizarre ritual involving five bankers has been taking place twice a day for more than 80 years. The room is located in the London headquarters of merchant bank NM Rothschild, a stone's throw from the Bank of England, and the arcane ceremony is performed in order to 'fix' the price of gold.

The gold-fixing ritual is aimed at providing the market with a snapshot of the spot price of gold at a particular moment in time. It is currently showing gold surging to fresh six-year highs on an almost daily basis as investors pile into the safe-haven metal amid fears of war with Iraq.

The first fixing took place on 12 September 1919 in a bid to restore London as the marketplace for gold after the First World War. The original instruction for the meeting stated: 'The principle to be maintained with regard to the sale of gold in the free market in London is that everyone attending the gold fixing is entitled to buy or sell gold on equal terms with everyone else present. It is also agreed that only one price shall be quoted and shall represent the price at which all supplies can be absorbed.'

The principle guarantees that large volumes of gold can be bought and sold at one fixed, clearly posted and undisputed price. As a result, central banks, mines and investors use the fix as their reference point when doing business. This is especially useful when the market is volatile.

The gold-fixing procedure may be anachronistic but its uses are ever evolving. Martin Fraenkel, a director at NM Rothschild and chairman of the committee, explained: 'Many contracts, including derivative contracts, use the average fixing price over a defined period as their benchmark. The process is very efficient and, because of that, it is continually being applied to new applications.'

He added that the transparent mechanism of the fixing is also important to its widespread acceptability. So what actually happens during the gold-fixing ceremony? The procedure is surprisingly straightforward.

At precisely 10.30am and 3pm, Monday to Friday, representatives of each of five London bullion houses - currently NM Rothschild, Deutsche Bank, Societe Generale, HSBC and Bank of Nova Scotia - gather in the fixing room. The meeting place at NM Rothschild was chosen because of its central, convenient location.

The chairman, who sits at the head of a long, leather-topped table, opens proceedings by suggesting a starting price of the mid-point between the most-recently traded bid and offer prices. The other representatives, who are seated at small desks in each corner of the room, relay this price via open telephone lines to their dealing rooms.

The chairman then asks who wants to buy and who wants to sell, and how many 400-ounce bars they wish to trade. If there are more buyers than sellers, he will move the price higher. If there are more sellers than buyers, he will move the price lower. This procedure is repeated until the number of buyers equals the number of sellers, at which point the price will be declared by the chairman as fixed.

It is estimated that up to 20 tonnes of gold a day are traded through the fixing. On an average-day, the fixing will last five to 10 minutes, but this can increase dramatically during times of volatility.

---

Gold -- Sharefin, 23:09:46 01/26/03 Sun

Gold To Test $400 Regardless Of Iraqi Outcome

The incessant drumbeat of war has helped to drum up tremendous interest in gold, sending this traditional safe haven asset above $367 a troy ounce Thursday in New York, a level not seen since late 1996, but gold still has room for gains, an industry analyst said Friday.

Market fundamentals are now in place to carry gold over $400/oz later this year, even if U.S. soldiers never set foot in Iraq, says Akio Shibata, chief economist with Japan's Marubeni Research Institute,

According to Shibata, gold's improving supply and demand situation over the past three years is a more compelling reason to invest in gold than the current "war premium".

"An eventual outbreak of a war with Iraq could very well serve as the catalyst that pushes gold over $400, but the market fundamentals have improved so much over the past few years that a test of this level was already well in the works," said Shibata.

For 2003, Shibata expects gold will easily clear the $400 mark before it meets with any significant profit-taking. Even if there is a significant pull back in gold later this year, Shibata expects a solid floor around $320.
~~~
Shibata noted that investor sentiment toward gold started improving in September 1999 when 15 European central banks signed the Washington Agreement, pledging to limit their collective annual gold sales to 400 metric tons for five years.

"At that time, gold was trading around $250/oz, which many saw as the lowest possible level for the metal. The Washington Agreement flushed out a lot of bargain hunters and prices have been steadily moving higher ever since."

With the gold price recovering from late 1999, many mining companies began rethinking their hedging practices, Shibata said, which in turn helped to tighten supply.

"The 'Big Three' mining companies - Newmont Mining Corp. (NEM), Anglogold Ltd. (AU) and Barrick Gold Corp. (ABX) - started buying back gold to close out some of their short positions," explained Shibata.

Last week, London-based commodity research firm Gold Fields Mineral Services reported that the global hedgebook in 2002 contracted by a "substantial" 352 tons.

"The motivation behind the large fall in global hedge positions was the strong and sustained increase in spot prices and more importantly, expectations that they will continue to rally," said Philip Klapwijk, Managing Director of Gold Fields Mineral Services in London.

---

Gold -- Sharefin, 23:08:01 01/26/03 Sun

Indians rush to sell gold as prices hit peak

It's a gold rush of a different kind at Mumbai's Zaveri Bazaar. With gold prices closing at an all-time high of Rs 5,850 per tola, people are lining up to sell their family gold. This is in a country that has the distinction of being the world's largest gold consumer.

---

Investing for a killing : C.K.D. -- PNB, 21:24:02 01/25/03 Sat

Previously I considered that the US was threatening China with the 'We will not be challenged as a superpower' tantrum.
There is a possibility that the new emerging threat to 'Pax Americana' is emerging from 'Old Europe', and it is this superpower that the U.S. fears.

Is the young, arrogant U.S.A. being blindsided by a New Force in the Old World?
Could 'Old Europe' have been biding it's time while the U.S. ran up huge debts with no tangible backing?
Could the financial precariousness and political rumbustiousness of the U.S. have signalled to the E.U. that the time is ripe for reasserting it's place in the world?

France and Germany are considering joint presidency, and considering allowing their citizens to vote in each others elections.
(http://straitstimes.asia1.com.sg/world/story/0,4386,167713,00.html)
The E.U. will swallow up more and more nations, and may extend to areas not previously considered 'europe'.
This is the birth of the United States of Europe, and it is backed by Gold and goodwill from many nations.

America's bid to become the defacto superpower may have all but failed.
Military might is all that remains after it unfortunately squandered decades of international diplomatic goodwill over the last year.
In the throes of economic decline it is threatening to lash out at countries popularly branded as 'evil' but
an axis of peace has unexpectedly formed in the E.U. backed also by China and Russia.

More countries will sell the USD and buy the Euro and Gold.
The Yuan will break it's peg to the USD and the U.S. will never see $18 oil and $300 Gold again.
The days of world USD pricing are over and can be seen in all commodities.
Foreign USD will come flooding back to the U.S. and offset local deflation - but who is going to end up holding all the cash? The man in the street? I think not.

The UN is accused of being spineless, but people forget that is was formed with the intention of preventing war.
If the US goes into Iraq without the UN, the UN will be destroyed in all but name in the same way the League of Nations was.
However, regardless of UN backing or not, we are now in such a predicament that World War Three is a guaranteed result.

Iraq with UN backing : Arabs will rail at the UN for not enforcing other resolutions even-handedly w.r.t Israel, and will find many sympathisers.

Iraq without UN backing : the UN will be destroyed and there will be no world forum for discussing solutions to Korea,
Taiwan, Balkans, Africa, South America, Chechnya and nuclear proliferation in Central Asia.
We will see unparalleled abrogation of treaties as evidenced already.
The world will degenerate into nation states in a period of economic decline with deadly results.

Similar to the proxy wars fought in Africa between the US/UK and Russia/China, we will see proxy was fought in other regions, predominately asia.

As evidenced in the Gold price beginning it's ascendency before S11 and Iraq, there are systemic geo-political and economic risks not seen since the Cold War ended.
Now the Gold War has begun.
The tactic of government bankruptcy used against Russia so successfully are now being applied to other rivals.
In these circumstances, only countries backed with tangible tradeable assets will endure.

Invest in physical Gold.
While governments invest for a killing in C.K.D (Crush - Kill - Destroy) it's a BOOM market.

Gold will increase in value (purchasing power) in ALL currencies.

Get yourself a little of the 20m cube. One ounce each. No pushing!

---

in re. Japanese rates fall below zero -- Giovanni Dioro, 07:00:34 01/25/03 Sat

With this give away, free for all policy in Japan by the BOJ, no wonder the japanese people have been buying tons of gold. They smell a rat.

---

Richard Russell -- Sharefin, 03:02:18 01/25/03 Sat

Gold

The metal is in the position where traders have to whine, "It's too high, I can't buy it, I just haven't got the guts to chase it here. It's got to correct somewhere along the line -- and then I'll buy it." Yeah, right. This is the way a bull market advances, while leaving the crowd out. Only we die-hard gold bugs are making money
here, only investors who believed that real intrinsic money is preferable to fiat paper that is being ground out at no cost by the Fed's printing presses.

"What's wrong with the gold shares?" I'm asked, "Why aren't they surging with gold? I just ran off a chart of gold divided by HUI, the "Gold bug's" index of unhedged gold shares.

From February 1987 to October 2000 gold shares outperformed the metal by a wide margin. Since October 2000 gold has outperformed gold shares. The ratio is now just about where it was in February '87 -- so that's the story. The stocks moved up first, then gold moved up, and now they're about even as they relate to each other.

~~~
History tells us the flow of gold points the way to where the power is. The stronger the nation, the more gold it accumulates.

Show me where the gold is being accumulated and I'll show you the next world power.

---

Fiat -- Sharefin, 22:19:14 01/24/03 Fri

Tokyo stocks end down on Wall St fall, fund report

Japanese stocks closed lower on Monday, led by Sharp Corp and other blue-chip exporters following a tumble on Wall Street and a media report that a hedge fund with holdings in Tokyo equities would close down.
~~~
Traders said a weekend report in the Financial Times newspaper that a long/short hedge fund called Eifuku with $300 million in assets would close down hurt sentiment, encouraging investors to take profits following recent gains.

"This hedge fund report was one factor hitting stocks today, but the bigger issue is still weak U.S. stocks," said Norihiro Fujito, senior investment strategist at Mitsubishi Securities.
~~~
An analyst at a European securities firm said Eifuku, whose assets were collected from Japanese and European investors, failed late last week.

Eifuku could not immediately be contacted for comment.

The analyst said Eifuku's strategy of shorting banks had run into trouble due to recent rebounds in bank shares. He said the fund was unwinding its positions.

----------
Email chatter:
Japan's Eifuku Investment Management has liquidated its Tokyo-based
hedge fund after it plunged 98 per cent ($300 million assets) in seven
trading days, the fund's manager told investors.

---

Fiat -- Sharefin, 22:12:00 01/24/03 Fri

Japanese rates in 'one-off' fall below zero

Japan ventured into uncharted territory on Friday as overnight call rates fell below zero for the first time in the country's history.


The overnight call rate on Y15bn of funds traded between foreign banks fell to minus 0.01 per cent. Because of the negative rate, borrowers are in effect being paid for borrowing funds because they will have to pay back less than they were lent.

With long-term interest rates already virtually nil under the Bank of Japan's "quantitative easing" policy, bankers said on Friday the move into negative territory was more a symbol of the country's decade-long economic malaise rather than an indicator of future financial chaos.
~~~~
"This is all part and parcel of a growing loss of faith in Japan's future," said Marshall Gittler, strategist at Deutsche Bank in Tokyo. "JGB movements are telling a story that deflation is set to continue indefinitely."

---

Gold -- Sharefin, 07:37:56 01/24/03 Fri

Gold strengthens further on speculative buying

Gold strengthened again on Wednesday night as aggressive speculative buying set in after the US close. The metal hit a six-year high of $364.50 an ounce in Asian trade, fixing at $364.70 yesterday afternoon in London.

Jeffrey Christian at CPM Group suggested that speculators were positioning themselves to take advantage of a possible price spike caused by congestion in the New York market at the end of this month.

The February Comex futures contract becomes deliverable on January 31. Mr Christian said speculators were betting that people who sold the February contract would find it hard to get the physical gold they need to deliver against their February positions.

"They will thus want to buy offsetting February contracts while either closing out these short positions or rolling them forward into future delivery months," Mr Christian said.

He pointed out that as of January 21 there was a total of 11.2m ounces of open interest in the February Comex futures contract, compared with only 1.7m ounces of bullion stocks registered against Comex positions.

---

Gold -- Sharefin, 23:00:24 01/23/03 Thu

Gold futures climb near $368

"Many market participants have the $400 level in their sights," he added.

Frederic Panizzutti, a gold analyst at GoldAvenue, a major gold online trading company, warned that while $400 is a possible target sometime this year, "gold remains very volatile and we shall expect many erratic trading sessions in the coming months."

~~~
Traders eye dollar moves

In addition to the "war rhetoric" and weakness in the recent weakness in the U.S. equities markets, gold has hit new highs "as the U.S. dollar continues to trade like a lead zeppelin," Nedoss said. The dollar fell to fresh multi-year lows versus the euro for the sixth-straight session Thursday.

~~
Salomon Smith Barney analyst John Hill also believes gold equities have under-performed but "it's just a matter of time."

In a research note, Hill blamed the divergence between the performance of physical gold and equities on several factors, including lack of conviction that the gold rally is sustainable and operating challenges and hedging issues among industry majors.

But "given the 'anticipatory' nature of gold equity valuation, we believe it will take time for the shares to discount prices above $340 per ounce," he said.

---

Fiat -- Sharefin, 22:55:03 01/23/03 Thu

Mizuho, With $100 Bln in Bad Loans, May Need Bailout

April 2003 may be even worse for Maeda. By April 1, the start of Japan's fiscal year, the CEO will have to evaluate all of Mizuho's bad loans by using the new standards imposed by Heizo Takenaka, Japan's 52-year-old minister of financial services. Mizuho says its bad loans amounted to $44 billion as of September, while Standard & Poor's estimates the total could be as high as $100 billion.

Once those loans have been evaluated under the new rules, analysts say, a dangerous chain of events could commence. First, Mizuho's risk-adjusted capital -- its capital after bad loans get subtracted -- may dip below the minimum level of 8 percent of total capital recommended by the Basel, Switzerland-based Bank for International Settlements (BIS).

`Big Fear'

``That's my big fear,'' says Hisanori Kataoka, a Tokyo-based analyst at S&P, the credit rating unit of McGraw-Hill Cos. If Mizuho's risk-adjusted capital drops to less than 8 percent, it would be in violation of the Basel Capital Accord, a capital adequacy agreement signed in 1988 by 10 nations including the U.S., the U.K., Japan, and Germany. Violators of the Basel Accord are barred from conducting business overseas.

~~~
Bad Loans Grow

This time, analysts say, a swift government bailout of Mizuho may not be enough to restore confidence in the banking system. That's because the amount of Japan's bad loans has ballooned. According to David Atkinson, Japanese bank analyst at Goldman Sachs Group Inc., Japan's deposit-taking institutions hold bad loans worth a total of about $1.37 trillion -- the equivalent of one-third of Japan's gross domestic product.

The Japanese government's large outstanding borrowings -- which stood at $5.19 trillion as of September 2002, according to the Ministry of Finance -- have also constrained its ability to issue more government bonds or use taxpayers' money to bail out a leviathan like Mizuho.

According to Moody's Investors Service, in 2002 Japan's outstanding government debt was 157 percent higher than its GDP. Japan's GDP amounted to $4.24 trillion in 2001, according to the World Bank.

Such a high level of debt prompted Moody's last May to lower Japan's long-term government debt rating to A2, a notch below the A1 grade it gives to the government of Botswana. That puts Japan's government debt just four steps above junk.

~~~
The nightmare scenario: If Mizuho begins to totter, analysts say, it could fan the fears of depositors in other bad-loan- burdened Japanese banks, causing them to withdraw their money in a panic. There would be reverberations across global capital markets as Japanese banks tried to meet those demands.

``If Japanese depositors try to withdraw their assets en masse, Japan's banks would be forced to pull in their overseas holdings,'' says Akio Mikuni, president of credit rating agency Mikuni & Co.

Using data from Japan's Ministry of Finance, Mikuni estimates Japan's external assets, consisting primarily of U.S. stocks and bonds, currently stand at about 400 trillion yen.

---

Gold -- Sharefin, 22:21:50 01/23/03 Thu

Gold price targets $365/oz mark

Gold rose steadily in post New York trade, as fund buying on the Comex Access system filtered through to spot gold, said a Sydney trader with a big bank.

The buying, fueled by a heightened sense that war is imminent following reports that a Russian military officer claimed a US-led attack against Iraq would take place in the second half of February, led gold to climb higher particularly amid thin trade prior to Tokyo trading hours, said Charles Dowsett, head of precious metals trading at ABN Amro Australia.

The gains then triggered buy-stops from Japanese trading houses, despite a weaker yen.

---

Gold -- Sharefin, 22:15:06 01/23/03 Thu

Gold prices upped

Merrill Lynch increases spot gold estimates, gold miners' profit forecasts;

Analysts at Merrill Lynch raised estimates for gold prices and increased its profit forecasts for several gold miners, while separately boosting its investment rating on Del Monte early Wednesday.

In a morning note, Merrill Lynch raised its spot gold price estimates for 2003-2005, and raised 2003 estimates for the following gold miners based on the assumption.

---

Gold -- Sharefin, 22:12:43 01/23/03 Thu

Comex gold futures briefly stretched

Comex gold futures briefly stretched
above the $360-per-ounce level to fresh six-year highs of $360.10
Wednesday as a combination of war jitters, a weak U.S. dollar and
woeful equity markets maintained buying interest in the bullion arena.
The most-active Feb contract closed at the highest settlement in
the contract's history at $359.90 - $2.40 higher on the day.
Dealers said overnight reports from Russia's Interfax news agency
that a Russian military officer claimed a U.S.-led attack would take
place in the second half of February proved the main item noted by
players as their prompt for buying, although President Bush's
reiterations that Iraq was still not complying with United Nations'
demands also served to stoke the geopolitical fires. The traffic
was not wholly one-way, however, as some fund long liquidation
and dealer selling were noted into the strength throughout the day.
This prevented prices from decisively overcoming the resistance in
place at the psychologically significant $360 mark.Indeed, that level
is seen remaining Feb's initial key hurdle over the
coming days.However, should the dollar and stock markets remain shaky
and geopolitical tensions stay taut, that resistance is expected to
be eroded over time to target the $365 and $370 levels as the next
major objectives.On the spot market prices reached a high of $360.65
to also scale levels not seen since February 1997, and like Comex
gold an upward bias is expected to continue defining activity over
the coming days.Again, the $365 and $370 levels are the next clear
upside targets, although some profit taking and dealer selling are
expected into the strength to limit any price spikes.

---

Gold -- Sharefin, 22:04:06 01/23/03 Thu

Pop Goes the Bubble III - Sell Dollars, Buy Gold Now!

The stock market and the housing market are not the only bubbles left in
play. The biggest one, the granddaddy of them all, the one within which and
upon which all other bubbles reside is the U.S. dollar. The dollar is
perched on a precipice, ready for a plunge, and the natural beneficiary will
be gold. The price of this barbaric metal is set to rise as men behave more
and more like barbarians.

----
Note:
This website was a few months ago advocating that gold could/would fall to below $200 in the vain attempt to sell Elliott Wave Marketing to their viewers & make money.
I personally contacted them & raised the issue with them of using Elliott Wave Marketing to make money off their patrons by solicting badly written articles & they vigorously denied this.
Seems that the POG has made them eat their own words.

Next thing we'll be seeing is Tim Woods subscribing to GATA & claiming that he knew they were right all along.

---

Gold -- Sharefin, 21:57:19 01/23/03 Thu

Barrick CEO Says Hedging Program Misunderstood

A string of setbacks and worries about its hedge book has seen shares in Barrick Gold Corp , the world's second-largest gold producer, fall while other gold stocks bask in one of the biggest gold rallies in years.

But Randall Oliphant, Barrick's chief executive, told Reuters that the share price was reacting to misconceptions about gold hedging and would rise as investors familiarized themselves with the Barrick growth plan.

Barrick shares have fallen about 12 percent since January 2002 when gold began its steady rise from $280 an ounce to over $350. It has underperformed the broader Toronto Stock Exchange gold index, which is up 23 percent in the same period.

In comparison, stock in Denver-based Newmont Mining , the world's biggest gold producer, has risen 40 percent, while AngloGold Ltd , the world's third-largest producer, is up 35 percent in Johannesburg.

---

Gold -- Sharefin, 21:50:48 01/23/03 Thu

Escalating war worries, weaker dollar, less producer hedge selling help keep metal shining.

Gold prices rose to a six-year high Thursday as worries of war with Iraq escalated and the dollar continued to weaken.

Around noon ET, gold rose more than two percent to hit $365 an ounce in New York, its highest level since January 1997. It was set or "fixed" in London at $364.70 an ounce, also its strongest level in six years -- and 30 percent higher than this time last year.

"We believe this is a defined trend," said Dave Meger, senior metals analyst at Alaron Trading. "the next target is up around $400 and we think it's a realistic target, given the fundamental changes in the gold market."

---

Gold -- Sharefin, 21:45:40 01/23/03 Thu

The Deregulation Of The Gold Market In China

Over the past decade severe distortions caused by official pricing policies have brought about widespread smuggling of gold into and out of China. Estimates vary, but levels of inward flows may have fluctuated between 50 and 400 tonnes in any one year. The hidden cost to the Chinese balance of payments may have been of the order of US$500 to US$4bn. The new freedom of the People’s Bank of China in setting pricing policy without State Council (Chinese cabinet) permission should alleviate this over time.

The official data for mine production have been distorted by these unofficial inflows, and although mines must still sell to the People’s Bank, they have in the past been stocking gold in anticipation of domestic price rises. The true levels of production may therefore not be as high as the 170 or so tonnes recorded in 1999.

~~~~
Chinese domestic demand for gold is potentially enormous: consumption per head is only half that of India, one fifteenth that of Taiwan, one thirtieth that of Hong Kong. Gold jewellery manufacture is expanding rapidly. The World Gold Council (which is actively promoting gold jewellery sales via television soaps) has drawn up a road map for liberalisation in conjunction with the Chinese authorities. This could take place over the next two to three years, and would involve linking the domestic to the world price on a Gold Exchange. There are thorny problems to grasp here. including whether RMB convertibility under the WTO is a necessary condition for the Exchange to function.

~~~
1. Gold Supply

The exact amount of gold mined annually in China is unknown, perhaps even to the Chinese authorities, but even including illegal mining is unlikely to much exceed 250 tonnes a year - about the same as one large Western company. There may, however, be a vast historical stock of gold jewellery in private hands; this has been estimated at as much as 5,000 tonnes.

Total gold mined since the setting up of the People’s Republic is unlikely to have exceeded 2,000 tonnes.

Unofficial flows into China may have been vast: for example, some estimates from the industry put the level at 400 tonnes in 1989, 200 tonnes in 1997. Alignment of domestic to world prices will reduce some, but not all of these flows.

China’s official gold reserves are reported at 12.7 mn oz, 395 tonnes (at say US$3.9bn equivalent to 3% of total reserves), but may be much more - one estimate is 1000 tonnes. Domestic supply alone is unlikely to have provided the higher level, but the Chinese authorities have been very active buyers in the market, as well as in hedging.

Given that current official holdings of gold are a small proportion of total reserves, and the potential for large private purchases of gold jewellery, coins and bars, it is unlikely that liberalisation of the gold market in China will unleash a supply of gold on the world markets from official sources (in contrast to the large silver sales in early 2000 from official reserves). However, as the experience of Korea showed in the 1997-8 Asian Financial Crisis, large amounts of scrap can be generated under the right conditions.

2. Demand For Gold

Over the next few years China can be expected to import at least 200-300 tonnes of gold annually, and possibly much more:

At 12.7 mn oz, and 3% of total reserves, China’s official gold holdings, if correctly reported, look underweight. Other official purchases cannot therefore be excluded, particularly as the People’s Bank may need to smooth the domestic markets once structural reform gets underway in the next three years. Purchases might amount to several hundred tonnes. A level of 15% of reserves (US$154 mn) would imply a holding of 77 mn oz, 2400 tonnes

Demand for gold in jewellery fabrication has been accounting for nearly 200 tonnes a year over the decade. Much of this product will have been exported, but some will have been sold domestically. An increase in per capita demand from the current 0.2 grams to between 4 to 9 grams per year (as say in Hong Kong or Taiwan) could in theory result in huge demand (4000 to 9000 tonnes per year). Balance of payment and administrative constraints would swiftly likely to curtail this classic "China demand" scenario.

3. Gold Mining

Proven reserves were cited as 4,265 tonnes in 1997. Of this, about 563 tonnes was available to be mined immediately: this in effect gives supplies for only two to three years at current rates of production. New capacity is adding only about 10-15 tonnes per annum. China may therefore face stagnating or declining levels of domestic supply.

China invested heavily in gold mining in the 1980s and 1990s, but official annual investment is falling sharply. Budget constraints suggest consolidation. China’s gold mines are small in scale, with even the largest producing only 3 tonnes. Even the top thirty mines produce less than one third of total production, the rest coming from very small operations.

---

Fiat vs Gold -- Sharefin, 20:47:16 01/23/03 Thu

Bobby Godsell: CEO, Anglogold

MINEWEB: Your point of looking at new areas - you must then presumably believe that the higher gold price is here to stay?

BOBBY GODSELL: Yes, we do. Absolutely. Firstly, we don’t predict, because the market sets, and because this is quite a volatile price in the short term. But everything that we see suggests that the dollar price is at least going to stay where it is, or continue to appreciate. And it’s not just the war in Iraq. People believe US equities were going to grow by 30% per annum, forever. They believed the dollar was going to be king, forever. They believed that economic growth was going to deliver astronomical, in fact impossible levels of growth. I don’t know how a company can grow 30% a year forever, a very large company. So I think there was a kind of cloud-cuckoo land of easy money around, and all of that has gone. Against that, I think gold now looks like a very much more attractive element in somebody’s investment portfolio.
~~~
MINEWEB: Looking ahead to the gold price itself, you have said that you think this is a level that will be improved upon. If you were to take a three- to five-year view, would it be consistent with an upward trend, whereas we’ve had the sliding trend for 20 years.

BOBBY GODSELL: Well, look, we’ve never been in the business of predicting prices even three days away. The weather forecasters could do a better job. One would have more faith. What I think is interesting is that investment sentiment is wholly positive now, whereas it was wholly negative for most of the last two decades. It’s the investment buyer of gold, the investor buyer that actually determines the price. And certainly sets the ceiling. And that’s where the volatility is. However, one must note that no more than 10% of gold offtake goes in any investment from, bullion or bullion coins or anything of that kind. It is jewellery that actually determines the floor. And we are focusing increasingly to make sure that we expand our customer base, because 3000 tons or a 4000 ton market, a bit more than that, goes in jewellery offtake. That’s the downside. I mean if the world were to go into a terrible recession, jewellery sales would decline. Probably, if the price went to $1000, jewellery sales would decline. So we are in a real business and we are looking at what we can do to modernise product, modernise manufacture and modernise retail. Jewellery has had a bad time. De Beers have got a similar analysis, as have platinums, and we’ve got to keep our customer base. If we can keep a secure floor on this industry, then we should benefit from the positive investor sentiment.

MINEWEB: So many people in consumer-related industries, and you’re mentioning just that now, are looking at China for the future. The recent developments there?

BOBBY GODSELL: Very, very exciting. Again, in Asia people buy gold because it’s money and because it’s beautiful. It's one thing. Indian peasants buy it for dowry purposes, the Chinese buy it for both. In the West, it’s quite hard to know how much real gold there is in a piece of jewellery, and there are very, very high margins. It’s one of the things we would like to see change. As China grows, we could see that market quadruple in size, from about 150 tons now more to the Indian level of like 800 tons. That would be a structural change and would have positive price effects in our industry.

MINEWEB: And concerns that there might be a structural change in India going the other way?

BOBBY GODSELL: Well, look, India - there are lots of complicated things. Firstly, there’s been a very high price which just had to impact. Then there’s been a bad monsoon, and that has it’s impact. Then there’s been a bad horoscope, because people buy for dowry purposes and if you have fewer weddings you get fewer purchases. But Indian demand has come back quite well in this last quarter. I don’t think we can take them for granted and I think what we’re looking at is younger, more modern consumers, who want sexy jewellery, they want modern jewellery, they want apparel, they want fashion. And that market is not necessarily well served. You know, businesses that forget their customers - and in the end, our customers are the jewellery, it’s the individuals buying jewellery -deserve to go out of business.

MINEWEB: Going back for the last 23 years since the gold boom of ’79, ’80, was there any other time during this period when you felt as confident as you’ve expressed yourself this evening?

BOBBY GODSELL: Look, one has to be careful. There was a big price spike above $400 around the Kuwait war. But you know, the background again was very different, it was equity kind of crazy time, it was a very strong dollar, it was a different interest-rate regime. So I would say I don’t know, 23 years is too long. But certainly for the last decade, I think you know, the stars are aligned in a way that they haven’t been for the past ten years.

---

Fiat vs Gold -- Sharefin, 20:41:52 01/23/03 Thu

Brewing the next Bre-X

In a rising market as we are currently enjoying, the risks actually increase throughout the sector because more projects come into play, investors become inured to doing their homework and chancers invade on the whiff of easy profits. Investors new to the sector need to be aware that it takes a special class of management to bring a mineral deposit to account and continue adding value. Even then, there are myriad temptations that can cripple an otherwise healthy company; Stillwater Mining being apposite.

Most of all, investors must beware of the handful of unscrupulous promoters currently running up small stocks, many whose best experience with gold is a wedding ring or their last fleecing. There is presently a scheme underway whereby newsletter writers and web site publishers are being cut in if they help build companies on the back of inflated stock flogged to unwary investors.

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Gold -- Sharefin, 06:45:27 01/22/03 Wed

Newmont Mining CEO Sees Output Drop In '03

Newmont Mining Corp. (NEM), the world's largest gold company, will probably produce slightly less gold in 2003 than the roughly 7.5 million ounces last year, Chief Executive Wayne Murdy told Boerse Online.
The U.S. company, which merged last year with Normandy Mining of Australia and Franco-Nevada Mining of Canada to become the world's biggest gold company, expects to make further acquisitions in the future but not in South Africa, Murdy also told the paper.

The prospect of a U.S.-led war against Iraq hasn't affected the gold price significantly, Murdy said, adding he would expect a quick resolution that would likely lead to a limited price decline.


Murdy said the price of gold had the potential to reach $500-$600 an ounce - the highest levels since the early 1980s - by 2010, according to the paper.

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Gold -- Sharefin, 06:31:54 01/22/03 Wed

Gold - metal or not?

By all means, stability of the precious gold has made it special. It has lost its consumer characteristics long ago. Like the first money, gold has started performing quite different functions - saving, trade servicing and others.



As the civilization was swiftly developing, its increasing boons (taken as their summarized prices) led to a deficit in gold. There were many money substitutes, and none of them survived. But paper banknotes, supervised by the vigilant state, within the past two centuries were able to eliminate the money deficit. The gold, initially a guarantee to banknotes, has turned into a “ghostly” half-visible commodity.



It is curious that at the earliest stage of paper banknotes’ existence their “gold price” was quite conventional to talk about. Things have changes to the contrary in the recent years: now we are used to talking of “paper price” for gold.



But gold is still a metal with an especially sophisticated mining technology.



Miners and metallurgists are good at their job. And despite geological conditions of mining becoming more and more complicated, actual volumes of gold production are growing.



Another obvious tendency in the recent decades has been the demand stably exceeding supply (mining) 20-25%. As soon as (in 1971) the States ceased supporting the dollar with gold reserves (thus putting an end to the Bretton Woods system) stable gold prices fell into oblivion. According to the Classic Economy, consequences were predictable - a huge hike of prices. The theory seemed to be proved in the early 80-s, when a troy ounce cost up to $850 (hand in hand with a surge in oil prices).



Otherwise, the theory proved to be very distant from the reality. In the past two decades fluctuations in prices on gold have occurred almost independently from the real production and consumption.

The matter is that central banks have stocked gold amounts nearly equal to 12-year world production output. The gold reserved are mostly thought to serve as defensive weapon to shield the world currency markets from speculative attacks. At the same time the most influential players on the global market have become more enthusiastic in their market game. And today it is not supply/demand correlation, but financial giants coupled with leaderships of many countries, who are pricing gold.

The way it is being done
A survey by the Gold Anti-Trust Action Committee (GATA) of January 1999 found that a culprit of low gold prices is a cartel of international banks.

According to GATA’s experts, the cartel has been manipulating on the gold market since 1994 together with assistance of high officials from different countries. The cartel allegedly includes the Bank for International Settlements, J. P. Morgan, Chase Manhattan, Citibank, Goldman Sachs, Deutsche Bank, às well as the Secretary of the US Treasury L.Summers, the Chair of the Federal Reserve A.Grinspen and the President of the New-York Federal Reserve W. McDonough.

GATA reported that “these banks and their elite clients were in a habit taking a lease of gold from central banks at annual interest as low as 1%. Then they sold the gold on the market and allotted the profits to the Treasury Department of the US”.

On the expiry of leasing contracts they buy off the gold on the market and return it to the central bank. Profits gained from the operation were, understandably, kept to the wheller-dealers.

GATA makes a supposition that the “gold cartel” dumped a price on gold “several hundreds dollars beneath the natural balance level”. In the aftermath a gold price dropped from $388 in 1995 to $273 in 2000. Now the cartel is making its best to hold in the price, failing which its gold leasing is becoming too expensive. In its turn, the GATA considers bringing the world prices on gold up to $600/ounce a priority of its policies. These efforts have been enthusiastically backed up by many manufacturers, including 300,000 members of the South Africa’s Miners Trade Union. The National Union of South African Miners announced the time had arrived to unmask international cartels, which had gone to all lengths in the past years in their bean counter.

GATA is convinced that it was the “gold cartel” who sank the Australian dollar, in order to make Australia’s gold miners sell in advance as much production as possible at higher local prices.

The world gold mining could not help being influenced by financial dealers. Meanwhile, deposits are gradually running out. As has been estimated by World Gold Council, the 10 leading gold mining countries (except Russia) have in the depths just 15 td. tons of gold. The amount is actually next to nothing:
--- only 40% of the world banking reserves;
--- gold amounts enough for 6 years of mining with the present rates;
--- gold amounts enough for 4-5 years of consumption with the present rates.

In short, a dramatic decline of gold mining is soon to come.

So, the gold metal trade is tailing itself along. Gold influx to the world markets is relatively small, compared to its combined deposits. And it makes the gold market easier for the cartels to deal with.

According to "Forbes" (an article of April 5, 2001), “the state, for instance the USA, finds it logical enough to print as much money as needed to sustain the price on the desirable level”.

By now the state debt of the USA has exceeded 6 trillion dollars, i.e. over 500,000 tons of gold at the current prices, or 10 times as much as the total world reserves (meaning all gold saved in banks and thoroughly explored deposits).

Thus, in the final analysis the debt has been created by a money printing press of the Federal Reserve System of the States.

Now with the global economic slump and a credibility gap with respect to various securities many are pinning hopes on the gold, as a stability warranty. In 2001 a troy ounce cost $270,15, while by now the price has risen to $327 (of November 2002); the market is awaiting further hikes.

In a struggle between manufacturers and financial magnates positions of the latter are, surely, stronger.

Today the gold traded at a reduced price is the Klondike for investments. Central banks throughout the world are afraid of a strong jerk up in prices, because it would dramatically spoiled attractiveness of shares and bonds, which are the basis of the contemporary world economy.

As for the world gold mining, a soon relief is coming. Gold prices are expected to go up. The only question remains wide open - up to what extent?

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Gold -- Sharefin, 06:29:47 01/22/03 Wed

Deutsche Bk Upbeat On Nickel,Gold,Platinum '03

Deutsche Bank Global Research is most bullish about the outlook for nickel, gold and platinum, raising its forecasts of these metals for this year in a recent report.
For gold, this is the third time in less than a year that the bank is raising its forecasts for the metal, Peter Richardson, head of global commodity research at Deutsche, told Dow Jones Newswires late Tuesday.
"We've been getting increasingly bullish on the gold price for the last 12 months," he said.
Deutsche first raised its gold price forecast in March 2002, and in another report in September, "we thought this was the beginning of a bull market," he said.
With the most recent report issued Jan. 13, the German bank forecasts gold will average US$340 a troy ounce this year, 6% higher than its last forecast of US$321/oz.
In 2002, spot gold averaged US$310.70/oz, up nearly 15% from its 2001 average of US$271/oz, making it one of the best-performing financial assets.
At 0110 GMT Wednesday, spot gold was quoted at US$358.87/oz.
Gold's potential to rise higher will come in the first half of the year, "when the demand for safe haven assets is likely to be at its highest" due to uncertainties regarding Iraq and North Korea, he said.
Apart from geopolitical concerns, changes in the dynamics of producer hedging, faltering confidence in the U.S. dollar and supplier discipline will continue to underpin an environment of a rising gold price, he said.
While he agreed that a rising Australian dollar against the U.S. currency could encourage Australian gold producers to re-engage in hedging, investors' favorable disposition to relatively unhedged producers, evident in the share markets, could curb those desires.
In the late 1990s, global gold producers built hedges to protect themselves against falling prices by selling future production at set prices.
However, the practice backfires when gold prices rise, and with geopolitical and economic uncertainties on the rise since late 2001, investors appear to prefer those gold producers who hedge relatively less.
ANZ Global Institutional Bank recently advised Australian gold miners to start hedging after the Australian-denominated gold price, which rose to its highest level in 15 years, could have peaked, as the Australian currency is likely to continue appreciating.

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Gold -- Sharefin, 05:51:56 01/22/03 Wed

Bank gold sales flare up again

The debate about central bank gold sales is flaring up in London again, given fresh impetus by the revelation that Portugal has sold 15 tonnes from its reserves. Although the Portuguese were careful to point out that the sales fell within the Central Bank Gold Agreement (CBGA), this was still a dramatic announcement -given that Portugal has never sold any of its gold before.

~~~
Rhona O’Connell at the World Gold Council suggests the Portuguese transaction “looks very much like the exercise of options purchased some four and five years previously, in which case the bank was either called away on a short call position or exercised a put.”

Merlin Marr-Johnson, analyst at the HSBC investment bank, reckons the Portuguese were probably “called away” on the 15 tonnes when the gold price reached US$350/oz in December.
~~~~
The irony is, says Marr-Johnson, that this is a time for the central banks to hold on to their gold as it is the only investment providing them with a decent return at present. “They are losing money on dollars, euros, bonds and equities. And there is no inflation to wear down the US’s massive debt.”

Barclays Schwab picks up this theme when he says that the most important implication from the Portuguese sale is that, “despite a slide in the dollar and an outbreak of global instability, gold sales remain very much on the central bank agenda. Indeed, a $100 rise in the gold price is viewed as a selling opportunity and not an argument for re-evaluating sales programmes.” (The Canadians, Dutch and Swiss also sold central bank gold in December, along with the Portuguese).

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Gold -- Sharefin, 05:49:41 01/22/03 Wed

Blow Hot, Blow Gold

What is important to note is that this sharp gain in gold price over the year is not accompanied by any sudden boom in demand for the precious metal in the country. "The demand for new gold in the country at higher price level was limited, particularly since August `02, when gold crossed the Rs 5,000-mark,’’ pointed out a bullion dealer.

``On the contrary, there was selling of gold and jewellery by holders at every rise in prices.’’ As a result of this, import of new gold in the country has fallen in the second half of ‘02. ``Import of gold in ‘02 is estimated hardly 450 tonnes in the country, which is the world’s largest market for precious yellow metal importing annually 600-650 tonnes,’’ the dealer added.

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Gold -- Sharefin, 05:42:33 01/22/03 Wed

Central Banks still favour dollar, gold reserves -survey

Most central banks have no plans to increase euro holdings of foreign exchange reserves but expect total external reserves to rise further, a survey of 54 central bank reserve managers published on Monday showed. The survey of the central banks, which control foreign exchange assets worth $1.1 trillion -- around half outstanding official-sector reserves -- found that they favour the dollar as the dominant reserve currency and safe-haven gold.
~~~~
SAFE-HAVEN GOLD STILL FAVOURED
The survey expected safe-haven gold to retain value as a reserve asset. "The main arguments in its favour...are that it is seen as providing insurance against a possible crisis or catastrophe and that it is not the liability of any country," it said.

"No acceleration of gold sales by central banks is anticipated and some purchases of gold are expected by some. Most take the view central banks will go on selling gold at about the rate seen in recent years."

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Gold -- Sharefin, 05:38:36 01/22/03 Wed

Buba rebufs calls for it to sell forex reserves

The Bundesbank reiterated on Monday its foreign exchange reserves were not up for grabs, rebuffing suggestions that part of them should be sold to finance business initiatives or repairs after recent floods.

The German central bank said the reserves played a vital role in underpinning confidence in the euro and any sale would require the approval of the European Central Bank.

"In conclusion, the bulk of Germany's currency reserves are not available for 'alternative' purposes," the Bundesbank wrote in its January monthly report.
~~~~
The central bank pointed out it was prevented from selling its gold reserves by the 1999 Central Bank Gold Agreement.

It said that even when the agreement expires in September 2004, it could only sell off its gold gradually in order to prevent a sharp fall in world gold prices.

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War -- Sharefin, 05:33:15 01/22/03 Wed

'Crude oil could hit $100'

The price of crude may soar to US$100 a barrel if Iraq sets oilfields ablaze in the event of a US-led war, leading to a global disaster, according to former Saudi oil minister Sheikh Ahmed Zaki Yamani.

Saddam "could destroy Iraqi oil wells... and strategic reserves would thus fall... and a barrel could reach between $80 and $100," the co-founder of the Opec cartel said late on Monday.

The United States "would be the cause of a global disaster if they strike Iraq," he told a conference in the Qatari capital.

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Gold -- Sharefin, 05:31:59 01/22/03 Wed

Malaysia's gold dinar a significant contribution

If Malaysia's proposal for the
implementation of the gold dinar goes through, it will be one of the
country's significant contributions to the economy of the Islamic
world.
Mustapha Mohamed, executive director of the National Economic
Action Council, the Malaysian government's economic think-tank,
said the success of trading in the gold dinar would also be an
indication of Malaysia's commitment to the devolopment of the Muslim
ummah.
"It would also be a testament to the strength of Islam," he said
in his speech to about 1,700 participants of "The Development and
Civilization of Islamic Thinking" seminar, organized by the
Inland Revenue Board, which opened at Wila Yah Persekutuan Mosque
here on Monday.
Prime Minister Dr Mahathir Mohamad had proposed the use of the
dinar for trade as it was a "stable currency with intrinsic value
that would not fluctuate violently and was not open to speculation."
The dinar, said Dr Mahathir, was a very practical way to solve the
economic and financial woes that beset the world today.
Mustapa, who is a former deputy finance minister, also said that
it was of great importance that Muslim nations around the world be
united to meet the future challenges of a more complicated world.
"Malaysia can be an example. As it is now, a lot of other Muslim
countries have sought our advice and expertise on how we handled our
privatisation program and the success of our Islamic banking and
capital markets."
Mustapa said if all Muslim countries took a common stance they
would be able to take care of the development needs of member
countries although it may not be possible to launch an Islamic
Monetary Fund, and "compete with the bigger World Bank or the
International Monetary Fund."

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Gold -- Sharefin, 05:28:54 01/22/03 Wed

Farquharson Bullish On Oil, Gold

Bob Farquharson thinks the recent jumps in oil and gold prices go beyond the prospect of war in the Middle East.

Farquharson is chief investment officer of A.G.F. Management Ltd. (AGF.B) and lead manager of the firm's C$800 million Canadian Growth Equity fund. About 35% of the portfolio is in those two sectors.

He said one of the greatest challenges in money management is to spot a trend - one that will last for a period of time - and to spot it as early as possible.

While war fears and a weak U.S. dollar have certainly played a role in the gold price's ascent, it's not the whole story, he said. Gold has endured a weak price environment for a very long time. The result has been little money flowing into the commodity's exploration and development, which means gold mines are depleting and few replacements are waiting in the wings.

"If gold consumption continues to grow as the world gets moderately wealthier, then we're going to have a relative shortage of the commodity," Farquharson told Dow Jones.

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Gold -- Sharefin, 05:20:56 01/22/03 Wed

Hedging halcyon days are over

The current strength in the gold price may have helped the market to temporarily exorcise one of its biggest demons; hedging. The latest hedging survey by London-based consultancy Virtual Metals, shows hedging at its lowest level in six straight quarters, a trend pundits believe will continue for some to come; but nobody’s saying for just how long.

~~~~
Asked by Mineweb at what price gold price producers might be tempted back into hedging production and what effect their return to forward selling would have on the price, Smith said: “The gold price 'effect' will likely already be 'pronounced' before gold miners re-hedge earnestly; that is, spot gold would be much lower - sales would tend to be into weakness, just as de-hedging was into strength. It would probably take a couple of big spot price falls to break the mindset that the market will give producers 'another chance' to hedge from higher levels.”

But Smith also points to interest rates as one of the largest determinants of hedging for gold producers. Regardless of the attractiveness of hedging, Smith believes a poor terminal case of poor liquidity and a lack of depth in the gold market, will leave hedging below its hey-day of the 1990s.

“If global interest rates were higher when spot gold fell, the attraction of a contango lifebelt would be enhanced. (There will be no 'Washington Agreement' among gold miners on new gold hedging!) I'm not forecasting this lower spot-higher rates combination in 2003 by the way. But I am forecasting that gold liquidity - the depth of gold derivative markets, gold's 'moneyness' if you like - will probably not recover on any price scenario, so there will be less hedging (than there was in the late 1990s) at any mix of price, interest rates, volatility or local currencies,” said Smith.

But even if Smith is proved wrong and the conditions once more become favourable for producers to hedge, investment fundamentals have undergone a marked sea-change in the last two years. Investors looking for pure gold exposure have made their voices heard by aiding the outperformance of non-hedgers over their hedged rivals.

“The Titanic turned two years ago in gold boardrooms and in AGMs. Now blanket gung-ho hedging is a thing of the past and those boardrooms have had to listen,”

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Fiat vs Gold -- Sharefin, 05:10:43 01/22/03 Wed

Silver Australian Dollars Instead of Russian Gold Ruble

Russian Sberbank starts selling foreign gold coins to Russians

Capitalism is the state of mind, when a value has only one goal - profit. Everything else does not matter. The most important thing to do is to sell something. It does not matter, what and to who. National interests stop playing any role at that. Will the Chinese buy it? Let’s sell it to them.

The Central Bank of Russia, the Finance Ministry and the Russian government were about to put a gold ruble into circulation after the financial crisis of 1998. If they decided to do so, the Russian economy would be totally different now. Probably, the situation with bank deposits would still be the same as now. However, selling gold coins on the home market would definitely allow the state to accumulate a lot more money, than it has at the moment.

Russian liberal reformers did their best in order to not let it happen. First of all, their American teachers said no to the gold standard in Russia. Second of all, a gold ruble would be dollar’s worst enemy. There was a time, when the USA spent a lot of its efforts in order to reduce the value of gold for the world financial community. Thirdly, Russian people’s priorities would change. The people would definitely prefer to keep their savings in gold, foreign notes would not matter at all. This would eventually make dollar leave the Russian economy. The USA would not like it at all. However, it deems that the Russian government is longing for the love of the White House.

So, what do we have now? Russia’s gold and value reserves dropped. Sberbank, the major bank, in which the majority of Russian depositors keep their money, decided to sell gold coins to Russian people. However, those coins will not be rubles, but foreign coins made of precious metals. This is another way to invest in foreign countries’ economy.

Sberbank released an official statement today, in which it was said that the sale of Australia’s classic investment coins would start until February 1. This time, Australian investment coins are silver coins of 50 Australian cents and of one Australian dollar. Fifty-cent coins are made of 999 standard silver. They were produced on the threshold of the Chinese New Year, so they depict the images of a goat and of a hieroglyph, which signifies this animal. One-dollar coins depict a unique animal of the Australian continent. The Australian money is known for up-to-date coining technologies, first and foremost. Certain Australian coins are really valuable collectibles. By the way, Sberbank’s press service also informed that last year the bank managed to sell 300 thousand foreign coins of precious metals to Russian people.

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Gold -- Sharefin, 04:58:41 01/22/03 Wed

Fund manager says gold foreshadows volatility

A spike in gold prices to near 6-year highs last week suggests commodities will fluctuate widely in the months ahead, a leading commodity futures fund manager said.

"We're at a secular low period in commodities that we're not likely to see for a while. This will mean more volatility," said Toby Crabel, president and CEO of Crabel Capital Management LLC in Milwaukee, Wisconsin.

"It's like a pressure cooker. We don't know where the steam will come out of the pot, but it's forceful and will be forced out," Crabel told Reuters in an interview.

~~~~
ONE SCENARIO

"Gold has been going up very steadily. Prices start to rise because of a lot of reasons. Using gold as a starting point, then interest rates are pressured and then stocks are pressured (negatively) eventually," Crabel explained.

He forecast a scenario of more volatility and some sustained trends depending on the supply/demand situations in each market.

"This cycle could go on for a while. It could just be beginning as commodity prices lag the movement in gold prices," he said.

"We have a pretty good Federal Reserve chairman, but Greenspan is likely to retire soon and I see no viable replacement and that could create a level of uncertainty that could exacerbate whatever problems we have," Crabel added.

He says he is not smart enough to figure out which markets will trend, but he expects that gold will probably move higher.

"Things were calm and stable for 5 or 6 or 7 years and that was a relatively peaceful time, but we will have more volatility and some trends ahead," Crabel said.

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Gold -- Sharefin, 04:43:02 01/22/03 Wed

GOLD FEVER TRUMPS GOLD-HEDGE FEVER

In the December 20, 2002, issue of the Canadian newspaper National Post, economist Martin Murenbeeld, Ph.D., published an article under the title "Gold Hedge Fever", giving a clean bill of health to Barrick's hedge plan by calling it "perfectly defensible". Gold producer Barrick has sold forward tons of future output, by some estimates to the tune of 5 years of mine production. Dr. Murenbeeld correctly states that the origins of hedging go back to agricultural economies. Farmers need futures markets where they can sell forward their production in order to lock in a good price, or to reduce the risk of a price decline that could be ruinous to the farming business.

Unfortunately, the author forgets to mention that farmers would never accept commodity exchange rules that allow speculators to sell short futures contracts in excess of one year's output. They know full well that unlimited short speculation would be prejudicial to their interest, as it would suppress farm prices below the marginal cost of production. In fact, short selling in excess of one year's output is outlawed for farm products. In addition, exchange rules limit short sales for other commodities as well, including gold. If these rules are not enforced it is because exchange officers have adopted a "see no evil, hear no evil" policy. They don't want to invoke the ire of their biggest client.

The "gold-hedge fever" of which Dr. Murenbeeld speaks is a euphemism for the invitation Barrick has issued to gold speculators to abandon their traditional haunt, the long side of the market, and to get aboard the bandwagon of short speculation, in order to drive down the gold price so that Barrick's hedges may flourish. Gold speculators have always understood the true nature of gold. They know that the devaluation of currencies must show up in the leap-frogging of the gold price, usually in advance but, in any case no later than at the time of the fait accompli. Speculators also know that the louder politicians shout from their rooftops that the national currency will never ever be devalued, the more likely it is that soon they will eat their words. Revaluations of currencies are virtually unprecedented. The Deutschemark and the yen have been revalued a number of times as a result of arm-twisting from Washington, in order to camouflage the devaluation of the dollar. Because of this obvious devaluation-bias speculators have traditionally been long in gold. The gold price is another proxy for the devaluation of the dollar. This was changed temporarily, in response to the bullying of Barrick. Hence the "gold-hedge fever". But when the bluff of the bully-boy is called, as it must be when governments reach the end of their rope and devalue again, then speculators will reverse themselves with the speed of light. At that time genuine gold fever will take hold, trumping the wholly artificial "gold-hedge fever".




The Economics of Gold Mining


What Dr. Murenbeeld does not understand, and Barrick does not want to see, is that the task of the gold miner, far from maximizing annual profits, is to maximize the useful life of the mine in his care. Only in this way can he maximize total yield realized over the entire life-span of the mine. Only in this way can he make it sure that no value is left behind when the mine is exhausted and closed down for good. This follows from the fact that gold is the monetary metal par excellence. I quote monetary scientist and historian William Rees-Mogg who wrote in The Times on January 6, 2003:

"Gold is very different from paper money. It has had very long-term price stability, whereas currencies normally lose 90-100 per cent of their value in each century. Its price does not determine the export cost of the nation of issue. It cannot be created except by an expensive mining process and in small quantities; it cannot, therefore, be over-issued for political reasons, to win an election or to pay for a war. It is an asset which is not represented by someone else's debt or liability. It is the only form of asset that is both liquid like a currency, and real, like property. For these reasons, it is the canary in the mine. Major changes in the world exchange system usually show up in the gold market."
~~~~
Paper Profits May Evaporate before Realized


"Barrick could not share its secret with anybody because the 'miracle' can only be accomplished through fraud. If one wanted to be charitable, one would assume that the accounting firms do not understand what they are certifying. Otherwise they would not give their good name to this chicanery aiming at misleading the public. Unfortunately, there are signs that suggest otherwise. The accounting profession may be a full accomplice in this conspiracy to defraud. It is not, has never been, and never will be possible to sell gold forward at a price higher than the highest price bid by the markets during the year under review, any more than it is possible to turn lead into gold profitably."

"Here is what Barrick is doing. It sells gold borrowed at the low lease rate, and invests the proceeds in high-yielding U.S. Treasury paper. Then it re-calculates its revenues boosted by the interest income (owing to the positive spread between the yield on Treasury paper and the gold lease rate) as if it had been received through a higher sales price on gold per ounce. Why is this a fraud? Because the transaction remains incomplete, and profits are only paper profits, as long as all the deals have not been closed out and gold has not been returned to the owners. It may not be possible to realize those paper profits. It is quite conceivable that these forward commitments will have to be closed out at hideous losses. For such a scenario nothing more drastic needs to happen than for the price of gold to return to a higher level where it has already traded for years or decades -- before the entire deal is closed out and the borrowed gold returned."

"Barrick simply assumes that 'what goes up must come down'. If the price of gold goes up, say, $200 per ounce, then it is duty bound to come down at least that much in due course. Those with financial staying power, such as Barrick considers itself to possess in good measure, will be able to ride out the storm caused by temporary spikes in the gold price. They can roll over all futures contracts showing a loss, several times if necessary, until the gold price comes down again. Barrick and others will, therefore, always be able to close out their deals at a profit."

"The fact remains, however, that all Barrick has accomplished is to have swept margin calls under the rug, thereby concealing a potentially unlimited liability from its shareholders and creditors. Therein lies the fraud, which SEC and other watchdog agencies should uncover and expose..."

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Fiat vs Gold -- Sharefin, 04:14:48 01/22/03 Wed

The Moral Failures of the Paper Longs

Based on my readings of GATA's work (www.lemetropolecafe.com), my readings of Ted Butler's work (www.butlerresearch.com), and a little application of common sense, I see clearly that the gold and silver futures markets are manipulated and controlled by the endless creation and selling of futures contracts. It is clear to me that the futures contract creators and sellers are the deceivers. It logically follows then, that the paper longs are the primary ones being deceived. I believe it is a moral failure to be deceived. We are not to be deceived. What do people say? "Fool me once, shame on you. Fool me twice, shame on me." Shame on the paper longs for being deceived!

True, the manipulation affects the entire world. It hurts miners all over the world. It continues to hurt long term holders of the actual physical metal, while at the same time, helping buyers of physical metal by providing the metal at artificially low prices. It hurts those who have invested in gold for a lifetime and now wish to sell for their retirement, but it helps those who are younger and still working, and who are able to continue to buy gold and silver at today's liquidation-sale prices.

But market manipulation is temporary, and when it ends and the price is restored to a true market value, some will be hurt, and others will benefit. When futures contracts default, it will not hurt the miners and owners of physical metal, who will benefit from the subsequent rise in price and shortage of the metals. But the paper longs will be among those who suffer the most. I believe they will either receive a cash settlement offer, or perhaps nothing. So the paper longs are deceived into thinking that they will receive the promises of gold and silver as written in the contracts they buy.

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Gold -- Sharefin, 04:02:14 01/22/03 Wed

Gold Rises to Its Highest in Almost Six Years on War Concerns

Gold rose close to a six-year high as concern mounted among investors of a looming war in the Persian Gulf, which could boost oil prices and hurt global economic growth.

U.S. President George W. Bush yesterday said nations should not be deceived by Iraq, which he accused of not disarming. Those comments and an order to send two U.S. aircraft carriers and extra troops to the Persian Gulf helped buoy demand for gold, seen by investors as a haven in times of economic volatility.

``There's safe haven buying and Iraq is the main issue,'' said James Moore, an analyst at TheBullionDesk.com, a research company. ``There will be a continued shift of money away from equities and the dollar, feeding its way into commodities such as oil and gold.''
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Hedge funds and other speculators have been buying gold futures contracts and hold close to their largest number of contracts since 1996. A report from the Commodity Futures Trading Commission showed they held a net 60,662 contracts in the week of Jan. 14, down from 63,563 the previous week, which was the largest position since February 1996.

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Fiat -- Sharefin, 04:00:19 01/22/03 Wed

Dollar Hits 39-Month Low Against Euro

The dollar retreated against most key rivals Tuesday, hitting a fresh 39-month low against the euro and a four-year low against the Swiss franc as a stream of hawkish commentary from the Bush administration convinced currency markets that war was almost inevitable.

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Gold -- Sharefin, 03:56:08 01/22/03 Wed

The never-ending war

The Kondratieff wave cycle is a controversial study of economic activity in capitalist societies detailing the rise and fall of stock markets, commodity prices and interest rates. Kondratieff's original study focused primarily on England although it has been more popularly applied to the United States. One intriguing aspect of the Kondratieff wave was the association of wars particularly to the peaks (summer) and the troughs (winter) of the cycle.
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But then that is what the Kondratieff winter is about. And that atmosphere we continue to emphasize that the one investment that can and will thrive is gold and other precious metals. The Kondratieff winter is about the collapse of paper assets. In economies that are overburdened with massive amounts of debt such as we are for the consumer, corporations and governments the only way out is either debt collapse or massive reflation to inflate the debt away. Both will end badly as paper currencies become more and more worthless. During the Great Depression while the Dow Jones Industrials fell 89% from its peak, gold stocks as represented by Homestake Mining rose over 700% during the same period.

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Gold -- Sharefin, 03:49:50 01/22/03 Wed

Rising gold prices add 40% value to jewellery exports

The persistent rise of gold prices right through April-December '02 inflated jewellery exports from India in value terms by about 40% - the highest during the last five years.

"With the dollar getting weak some countries which have earlier been intending to reduce their gold reserves have currently shelved the idea. As price shot up, jewellery manufacturers started vaulting bulk quantities of gold expecting a further price increase," a top official from Gem and Jewellery Export Promotion Council (GJEPC) said. "Export of gold jewellery during March are expected to rise with the Indian exporters trying to sell the maximum amount before the year end. The sale is further expected to increase due to an increased demand from the Middle East due to the forth coming Dubai festival in April," the official added.

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Gold -- Sharefin, 03:34:11 01/22/03 Wed

Sure sell, that's exactly what the gods of the gold bull market want you to do

March Dollar Index was down .50 to a new low. On the monthly chart it appears that the dollar is on a whole new leg down. March euro up .69 to a new high of 106.98. March yen down .21 to 84.79. The declining dollar has to be striking fear in the hearts and pocketbooks of foreigners who are holding trillions in US assets. If foreigners start to sell heavily -- watch out!

Feb. gold down all night as usual, but by the close of today's session Feb. gold was up .70 to a new high of 357.50. Many warnings from "experts" to the effect that gold is "too extended" and is probably topping out. Maybe -- but remember, bull markets will do whatever they have to do -- to advance with the fewest number of investors on board. Thus, talk of gold being over-extended serves to keep newcomers out and oldsters taking profits.

So is gold "over-extended?" Hey, this is a bull market in gold so who the hell knows! The experts sure don't.

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Russell Comment -- "Forget your gold cycles, this is a bull market, and that's the only cycle I'm interested in."

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Lenny's Corner -- Sharefin, 03:11:08 01/22/03 Wed

GENERAL COMMENTS:

As the events of the world continue to unfold, usually in a fearful manner, the gold market has rallied sharply these last two weeks to press against technical resistance at the $360 price level. The financial world, which seems to convincingly believe that a war in Iraq is inevitable, has bought the gold market, the oil market, and has pummeled the USD relentlessly. It is clear that everyone is standing on the same side of the rowboat, that we see markets that are clearly dominated by speculative fervor, that now have a very significant "war premium" built into current prices. We clearly have runaway bull markets in gold, oil, and the European currencies. Prices are currently well above fundamental supply/demand "value" and the markets are clearly anticipating perhaps not the worst case, but a very bad one. These are obviously dangerous markets to trade, more so than has been the case for many years. But, the trend in gold is most decidedly higher and more and more mainstream analysts are now touting the ownership of gold, having missed the first $100 move of the bull market.

Trust me, the market is now almost completely dominated by the investor or speculative concern and physical off take is simply awful. Lease rates for gold remain at virtually zero for the shorter-term durations and constructive reports of actual physical demand are virtually impossible to find. Investors and speculators are buying derivatives, or futures, while the actual metal remains unloved and unwanted. This should not be a great surprise, as "paper gold" is so much more cost efficient than the underlying precious metal. But, the downside risks of the gold market have been greatly enhanced not only due to the lack of physical demand at these lofty price levels but the fact that the current price of gold is maintained solely by the psychology of investors and speculators. And we know how quickly that can change.

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There has been much talk among traders and analysts of late about the correlation between the values of the shares of the gold producers and the price of gold. While gold remains a dollar or three below its 5-year highs, the gold stocks are still 30-50% off their highs seen earlier last year. It was once strongly believed that the gold stocks PREDICTED, or led, the price of gold, but this correlation is now very dubious. Could it be that the gold shares are telling us that this rally in gold is not to be believed? Doubtful, as gold continues to rally while they falter. What I believe is really happening is a realization of the fact that these two markets are not as positively correlated as many gold bugs would like to believe.

Central Bankers continue to sell gold into the market, thu