WHY gold will go parabolic --HOW good gold news
will be fatally
bad news for many (most?) mines--as the price
rises. --"Hedges" is
wrong word. They aren’t hedges! A pity.
To clarify our position on hedging, we believe it’s the
right on any
commodity producing company to set a price for
their product in the
future so as to be able to accurately project/ budget
future expenses
against a known revenue. Our concern is not
hedging. Our concern is the
vehicles that are being used to hedge. And also the
use of these
instruments to bring on new production in a
"negative market" for the
commodity gold, which would otherwise have
reversed its price
negativity, ie, a market price below total cost, then
around $350. We
experienced a 22 year bear market in gold
prolonged artificially by the
constant financially unnatural increase in production,
not justified by
natural market forces.
It’s a miracle the gold producers did not kill their own
golden goose
stone dead beyond revival. Now the gold producer’s
foolishness threatens
gold's monetary application by artificially forcing gold
too high in price,
too early, before the fundamental equation is wholly
behind it. Now that
the ineptitude of the gold producing industry failed
to kill gold on the
down side, it seems they are about to try & kill gold
by inadvertently
forcing gold too high before its time. All the while the
management of the
gold producer sit in their ivory towers, smugly
considering us alarmists.
For over 40 years, We (separately or jointly) have
analysed the price of
gold more acutely than anyone in the exploration,
development, advisory,
media, mining field. But the leaders prefer to listen
to only those who
have sold them these instruments of financial
incapacity.
The instruments being used today are non
transparent, unregulated, non
market priced, private treaty unlisted arrangements.
These instruments
have no clearinghouse facility therefore they present
significant counterparty
risk. What a bill of good the gold banks have sold to
the gold
industry. It is in grave danger of significant financial
problems as a result.
It’s so perverse these problems are brought on by
the very bull market we
have so long desired.
The truth is out---U read it first herewith, & in HSL.
HSL is the Free
Gold Press leading edge. We are warriors in the war
for sound money,
transparency, governance & level playing fields;
which is the stuff Free
Markets are made of.
Let's have a fast review before we reveal to U the
shocking truth of greed
gone wild in the gold cartel.
1/Gold almost never leads a rise in the commodity
market. Yet today it is.
2/Gold is rising for other & sound reasons.
3/ Many key commodities (Soy, Wheat, and Sugar)
are far below their
cost of production & have been for the normal
multi-year inventory takedown
period.
4/The equation that is the soundest fundamental
reason for a gold bull
market is a growing current account balance
(overseas holders of US $1s)
with a growing US budget deficit plus a classic
technical top in the
USDX (index measuring $'s performance trade
weighted) & a lower bond
market.
5/The Federal Reserve is in the tightest box since it
was (illegally)
founded in 1913. Its mission then & now is to
prevent liquidity meltdowns.
The Federal Reserve later this year will not lead
interest rates
higher but only follow the mkt in catch-up action to
the market reality of
higher rates. If the Federal Reserve dared to lead
interest rates higher in
2002, U would see NASDOG below 1000. That is
being boxed in!
6/US stocks show ongoing weakness, confirming a
bear mkt.
7/ Notional Value of a derivative becomes Real
Market Value at $354
gold as a product of risk control systems used by all
gold banks and derivative traders. This is a key
element of this analysis as the numbers U are about
to
see become real $ figures in the marketplace.
Anyone in gold knows that a 22 year bear market is
a very long time. U
also know the fundamentals that sparked the boom
of the 80s & 90s has a
lot to do with accounting mirrors & the Madness of
the Crowd syndrome.
Much has occurred in gold during this period & the
biggest event is the
advent of Gold Banks, Gold Derivatives, Gold
Leasing & Financial (not
Mining) leadership (virtual control) of gold producing
companies. Gold
producers became commodity traders. The Treasury
Depts of gold
producers became incubators of Chairmen & CEOs.
The big guns made
more money shorting the gold mkt via derivatives
than they did mining
gold. They first got short not by logic but as a
gimmickÐsold to them by
gold banks to obtain development money. They thus
helped the gold mkt
go lower by constant selling of future product.
As proponents of Free Markets, we have no
objection to a commodity
producer seeking to fix the sales price of the item
they produce. They
need to know a hard revenue figure in order to
project spending. But that
is not what happened in the last 10 years.
Producers liked the profits from
being short gold & loved non-recourse loans for
production that require
shorting the production. It is now time we all stopped
calling these
maneuvers hedging. It is not. It is shorting gold.
Yes, it’s hidden in a
maze of sometimes incoherent derivative
transactions but the bottom line
of a commodity spread is that it is a short sale.
The producers were not satisfied with the Comex
2-year facility to short
gold. They did not want to put up the margin
requirements. Rather they
stampeded into the New Age Derivative market of
the gold banks. Here
they could deal in so-called No Margin Call Hedges
which are in the
main loan lines against in-ground production without
margin
requirements or complex put/call arrangements.
They bought already
constructed packages of derivatives as required by
their lenders on
development loans for new production, often without
putting up cash out
of treasury first. To prove that the company itself
had little knowledge of
what they were doing, Ashanti had to call in a rocket
scientist from
Goldman Sachs just to figure out how deep they
were in a financial hole
when gold crossed $325 in the summer of 2000.
Many of the present gold
producing hedgers are dependent on in-house
accountants or their gold
bank to explain what they are doing. We submit that
the board of
directors of these companies if questioned
individually would not have a
clue about what they hold in their " clear & present
danger" positions.
We know who does know. We can only identify
these people to U as Dr.
No & Hung Fat. They are running the gold market
now, not the cartel.
The cartel thinks it has an upper hand but it is in a
bear trap that has
already snapped closed on their financial legs. The
Gold Cartel is so fat, egotistic &
ignorant they don’t yet know they are dead in the
water.
Here is what Dr. No and Hung Fat know;
Major Central Banks Gold Holdings: The Long
Position
--Here are the facts about mine shorting that they &
the cartel don’t want
U to read. We dug them out via our specially hired
R&D team:
Major Central Bank's Gold Holdings
Metric
Tons
Troy
Ounces
Value at $300
U.S.
8149
261,998,499
78,599,549,700
Germany
3456.6
111,133,147
33,339,943,980
IMF
3217.3
103,439,412
31,031,823,690
France
3024.8
97,250,345
29,175,103,440
Italy
2451.8
78,827,822
23,648,346,540
Switzerland
2149.7
69,115,005
20,734,501,410
Netherlands
884.5
28,437,560
8,531,267,850
ECB
767
24,659,817
7,397,945,100
Japan
765.2
24,601,945
7,380,583,560
Portugal
606.8
19,509,227
5,852,768,040
Spain
523.4
16,827,833
5,048,350,020
China
500
16,075,500
4,822,653,000
Russia
424.2
13,638,454
4,091,536,260
Tiawan
421.8
13,561,292
4,068,387,540
India
357.8
11,503,628
3,451,088,340
27699.9
890,579,485
267,173,845,470
Avialable
for sale (@
62 2/3)
558,096,744
167,429,032,219
Gold Producers Short Gold Position:
GOLD
COMPANY
% OF YEARLY
PRODUCTION
HEDGED
Agnico Eagle
0%
Ashanti
873%
Aurion Gold
862%
Aurora Gold
186%
Anglo Gold
184%
Barrick Gold
298%
Cambior
309%
Cameco
400%
Durban Deep
67%
Echo Bay
27%
Freeport McM
0%
Glamis Gold
0%
Goldcorp
0%
Goldfields
0%
GRD
964%
Harmony
99%
Hecla Mines
102%
Hill 50
645%
IAMGold
68%
Inmet Gold
80%
Kiross Gold
54%
Lihir Gold
404%
Meridan
0%
Mim Holdings
135%
Newmont/Norm.
124%
Normandy NFM
407%
Placer Dome
1202%
Resolute
105%
Rio Tinto
0%
Sons of Gwalia
1157%
Teck-Cominco
+A16
95%
TVX Gold
220%
Western Areas*
506%
198%
* Western Areas poduction number is
low due to restructuring.
Total Ounces sold Short BY Producers
94,832,857 oz = $30,346,514,240 @ $320 AU
Total Nominal Value of derivatives on the books
of the Commercial
Banks of the reporting 48 nations of the IMF
survey.
900,000,000 oz. or $278,000,000,000 @ $320 gold
= USD$288,000,000,000
Gold producers need to know what they’re up
against. Gold Producers are the
smallest presence in the Gold Derivative market!
FYI, at $354 gold producers only 11% of the total
notional value which then will be a real value.
----Now U know the Shocking truth of the greed
driven gold banks.
Gold Producers are ONLY 11% of the TOTAL World
Gold Derivative ounces and value.
Who are the others? They are the Wise Guys. On
Wall
Street, we call those who are in the gold derivative
market without a
commodity producing reason, the Wise Guys. These
Wise Guys are the
Carry Trade who are, like the producers, short gold
spreads & entities that
have used the gold lease derivative market for
financing their business
that has nothing whatever to do with producing,
rendering or selling gold.
Dr. No & Hung Fat are not gunning for the
producers. They are after the
Wise Guys. The Gold Derivative market is a
cornered short sided market
in a corner. This is a titanic secret market struggle
between giants. The
recent 300pt DJIA 1-day wonder rally is an example
of what can happen
when the short side of anything gets crowded. Gold
is, in a volume sense,
a peanut market but with a short corner of such
mammoth proportions
that anyone with one synapse speaking to another
can understand how
dire is the condition of the derivative dealing gold
banks.
Now what does a cornered rat do?. When Jesse
Livermore cornered the
coffee mkt in the early 1900s he had everything
fundamental going for
him. What he forgot was the political connections of
the coffee importers
& the US govt. The importers were short to
Livermore who was long.
They called their pals in Washington & demanded
price & import
controls. Poor Jesse got walloped on that position
because he forgot to
calculate what short rats will do when cornered.
Dr. No & Hung Fat are too smart to make the
mistake Jesse Livermore
made. They know exactly what the derivative shorts
will do & when.
Nothing is new on the face of this earth. They will
call the Central Banks
& demand the Cavalry comes to the rescue. U must
have seen recently
the Cartel looked downright non professional in their
selling into a bag
held by these two great Asian traders. The Cartel is
losing its power &
only providing an easy accumulation of more
positions for sources of
money that make the cartel look poor in comparison.
Now let’s assume Dr. No & Hung Fat push gold, in
time, above the
critical $354 & the derivative melt down is at 2000
degrees F. The
Commercial Banks scream to their power sources.
The Central Banks line
up to sell their gold, with the exception of those
under the Washington
Agreement. All they can offer is: 561,065,075
ounces worth @ gold price
$354: $201,422,361. But the derivative short
position is
900,000,000 oz with a value @ $354 of $
318,600,000,000.00
That means the situation now is that the derivative
gold short position is
equal to all the gold held by all the central banks
outside of the
Washington Agreement. U now know why the
Washington agreement
came into place in order to prevent just what is
happening. Those Central
Banks, seeing the figures, hoped to slow down the
gold derivative trade
by freezing their participation in it. Now U know why
traditional gold
dealers are leaving the gold mkt & expunging these
instruments from
their books.
If all Central Banks in the world sold all the gold they
held in a
derivative melt-down they would make the following
offer: All Central
Banks = 890,579,485 ounces of gold held to a Short
Derivative Position
forced to cover of 900,000,000 oz. Assuming that
central banks then held
no gold at all, the gold price would be in the hands
of Dr. No & Hung Fat
who would more than likely sell a segment for over
$2000 per ounce with
the attendant negative effect on the US Dollar,
making gold even more
valuable.Thus it is reasonable to assume Central
Banks will not sell all or even a
large part of their remaining gold. It will then be their
primary reserve
asset, growing in value, & like the 70s they are more
apt to buy then sell
regardless of silly rhetoric.
In conclusion, we again say to the gold producers,
expunge your books
of all derivative contracts. U have alternative means
of financing your
development projects today. You can go recourse
on your loans for new
production without fear of financial problems. Your
financial problems
lie more in the counter-party risk of the paper gold
short derivative
spreads U hold now! There is no free lunch &
there’s no commodity
contract without a margin call. We do not oppose
hedging done correctly,
in open, listed, clearing house indebted instruments.
(This is an HSL/FMU copyright article.
Permission to reproduce is
hereby granted, provided phrases are not quoted
out of context &
provided full by-line credit is given with email
addresses:
www.HSLetter.com and www.Tanrange.com
Embargo: No reproduction
permitted until May 29, 2002) END.
side note DROOY, will be unhedged on June 30th....
and yes, I have a position from 2.42..I was late-g- |
