Please read Alex's note #39580 which talks about producer selling. Whether the content of that note is correct is irrelevant. What is relevant is market perceptions, and those perceptions are that between the CB sales, and producer hedging, gold will not be able to mount any kind of sustained rally.
Yesterday was interesting day in the oil markets. Earlier the Germans noted that they were going to sell a substantial amount of gold from their reserves. Oil dropped as did the XOI. Later that same day, the producers indicated that they would not increase production. Then a bit later, oil inventories showed another decline. The slide in oil prices reversed.
This is in sharp contrast to the gold producers. Recent numbers showed that gold production has steadily been increasing up to very recently when they have leveled off. The demand for gold has reached record levels at the same time that roughly 40% of all gold mined is uneconomic. The producers in a feeble attempt at protecting their balance sheets continue to sell gold forward at a discount to its true value. You have not been able to answer nor has anyone else, the question of why the producers do not close the uneconomic mines and replace the lost production with gold supplied by the cb's. The producers who become middle men instead of the situation we currently have. The producers sell gold in the ground at a discount with the bullion banks acting as the middle men and reaping a profit. The banker always makes money. The producers selling cb gold instead over their valuable in ground assests would replace the bankers as middle men. Sales volume would not be effected and operating income would improve because the gold purchased has already been refined and could be sold for a small markup. This would be a dramatic improvement of selling uneconomic gold at a loss while reducing your overall reserves.
Implementing this policy who have one of two impacts. First it would call the bluff of the cb's. They would either have to produce the product for removal from their valults or they would refuse to make good delivery on physical gold preferring to play the paper market with its intangible perceptions. Second: the cb's would produce the gold rendering all the discourse about short positions, leased positions, as meaningless.
Why does this not happen, when in fact this would be the prudent course by 99% of all businesses today. The reasons are varied, but it would have to be one of the following: first, the producers are inept as corporate managers, two: they are being pressured to go along with the game, third: the producer heirarchy are making money for themselves and have removed themselves from the shareholders interest.
Double D, you are quick to point out what you considered to be unfounded allegations about events in the gold market, yet you produce very little in the way of information of why gold continues to decline in a very favorable supply and demand environment. An environment shared by other commodity based business who are beginning to flourish.
In the view of the producers, you make a good shareholder, you don't question their competence and are content to believe that normal market forces are at work in the decline of the pog.
Ken |
