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Gold/Mining/Energy : Gold Price Monitor

GDXJ 109.23

+3.7%

4:00 PM EST

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To: Alex who wrote (37055)	7/12/1999 7:23:00 PM
From: Rarebird	Read Replies (2) of 116779

Gold Carry Trade: Once the POG rallies the carry positions will become unprofitable, and will trigger other carry positions' stop losses, leading to a sudden sharp rise in the POG. This is what happened to the Yen carry Trade ( which was in the billions of dollars ); the dollar went from 147 to 107 yen in just a few weeks before doing a partial retracement. The Gold carry Trade does not in any way affect the supply or the demand for Gold; that is why it has no long-term effect for shareholders. The gold which is being borrowed must be paid back. In fact, the gold carry trade is actually long term positive for gold, since it guarantees that a substantial amount of gold must be paid back each month over the next few years. Once the price rises and the borrowing is heavily scaled back, these monthly paybacks will be a steady source of upward pressure on the gold price, since the borrowers will have to find this gold somewhere. Gold Bears are fond of quoting Chairman Greenspam's comments last summer that " the Central Bank will lease more gold ( to be dumped on the market ) if the POG rises" as the REASON for capping any major Gold rally. This threat is the equivalent of a Parent promising to punish a child severely if the latter does something immoral against its will. How often is the threat actually carried out in its severe form if the child disobeys? Seldom. Make no mistake about it: The Bears view Gold as CURRENCY- even if it is a currency of " last resort." The Bearish case for Gold hinges on the continued strength of the Dollar- even though it has lost 90% of its value since 1800. Once the dollar resumes its downtrend in the second half of this year, there is Nothing- and I mean Nothing that any CB can do to prevent a dramatic rise in the POG- the Shiny Yellow metal would spit in its face as the dollar fell. As a shrewd Central Banker, Greenspam ( along with other CB's ) would Buy Gold aggressively as the dollar resumed its decline. These guys are pros. It's all a game to them to prolong the Bubble. But they know deep down that the " endgame" is very near at hand. So is a Bull Market in Gold.

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