For all intended purposes, the forward selling by producers is over. Aside from the high lease rates, this past week has demonstrated that while the bullion bankers have promoted the program as a type of insurance against lower prices, the producers have a higher degree of liability on the upside than was thought possible. This risk is spread over the banker, the lender of the gold, and the producer. Forward selling is over.
Without the supply provided by leasing gold, the deficits between production and supply will be exacerbated. Consequently, there appears to be a floor developing in the POG at above 300.00. The intangibles, how elastic is demand, at what point do all the shorts have to cover, and how will the prices effect the stock price of the producers. The winners to date are the junior producers with undeveloped but proven deposits and limited hedge books. They will probably outperform into the future.
My fax has been filled with propaganda from the gold charlatans up in Vancover telling stories of up and coming companies with the motherlode. Avoid these at all cost, stick with quality juniors.
Ken |
