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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: LLCF who wrote (57193)12/13/2004 7:52:24 PM
From: Taikun  Read Replies (1) of 74559
 
DAK,

I think we might be on the same page here.

No, I don't disagree with GATA. Eventually they will not be able to depress the POG to support issuance of their fiat currency but so far, and for the forseeable future, the CBs can continue making gold look unattractive and the I-banks are their partner. I think the I-banks will stop doing deals if there is no more physical to sell into the market with, so I agree they will not go naked. As for Barrick, I'm not sure about calls but I think their financials mentions forward contracts.

You wrote this:

<But as an ex-derivatives trader if I suggested borrowing gold and selling it and investing the proceeds to collect interest without a hedge on the short position to my oversight committee, I would have been fired immediately. NFG>

Here:
Message 20851387

and I just don't think this is what the I banks are doing (yet) and if they are it is a small scale. I believe they're covered with the ability to partner with producers who have a need: hedge future production to improve bank ratings, raise debt efficiently and stabilize CF.

I do think this, what you wrote:

<they are worried [if I read you right] about manipulation, and GLD is some dark I-bank clone of some death star.>

Message 20851377

My point is that if GLD sub-custodians can use futures you never know where the physical gold is.

If they will use 'stabilizing transactions and futures', will the outstanding shareholder holdings of GLD *always* equal the physical gold in the vaults?

I think the answer is: "No, not always".

Therein lies the problem and opportunity for abuse.

D
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