Great article by PATRICK BLOOMFIELD - KUWAIT/WASHINGTON Conspiracy and BILL MURPHY mentioned again:
Monday, October 25, 1999
Foresight at times can be fooled
Plausible scenario for why Kuwait is lending gold reserves
Patrick Bloomfield
National Post
Nothing is ever as it seems. A week ago, this oh-so-prescient columnist was talking of the Standard & Poor's 500 composite index possibly flirting with the low 1100s.
Appearances to the contrary, the S&P headed north instead. It resumed nodding acquaintance with its 200-day moving average as it moved marginally above 1300 this past Friday. Just maybe, the bull is not as dead as he is sometimes made out to be.
And wasn't this past week notable for the news Kuwait was going to help out those hard-pressed short sellers in gold bullion by lending out the 79 tonnes in its gold reserves through the Bank of England?
As I said, nothing is ever as it seems. Rather than a win for the shorter sellers, the news could be something between neutral and a plus for gold bugs. After all, Kuwait is a gold bug, too.
The Kuwait Investment Authority is now the largest shareholder in Thistle Mining Inc., a Toronto global mining-finance company specializing in precious metals.
The authority acquired its major interest earlier this year by swapping its two-thirds holding in a private French company called CIDEM for treasury shares in Thistle.
That little gem of information was originally brought to the public's notice by writer Paul Kaihla in Canadian Business magazine and repeated last week in a commentary by one Bill Murphy of Dallas (whom I introduced to readers last week) on his fun-filled Web site Cafe le Metropole (www.lemetropolecafe.com).
Thistle's president, Scotland's Willie McLucas (that is how he signs himself), said no more in his last president's report than that Thistle's new largest shareholder would be an outfit called International Civil Co.
But the notes to the accounts were a little more explicit. It seems the company is a wholly owned subsidiary of the Kuwait Investment Authority. It will acquire 345 million Thistle treasury shares in the swap. (The last interim report mentioned only 34.5 million, which I assume was a typo.)
Mr. Murphy surmises that the possible explanation for the Kuwait gold-lending decision might run something like this: Begin with the assumption that U.S. officialdom (together with some very worried folk on Wall Street) is all too keen to get the word out that the fallout from the past stampede to sell gold short is now under control.
So Washington seeks to muscle Kuwait into going along with this scenario by selling gold. But the Kuwaitis, who were not born yesterday, go along only as far as lending the stuff.
That script sounds plausible to me, and suggests that not everybody has been cowed by apparent muscle-flexing to keep gold prices in tow.
Certainly the top guys at Newmont Mining Co. and Canada's Placer Dome Inc. made it clear at the Denver Gold Conference last week that they regard the more likely gold price trend to be upward -- over time.
If they were talking to their book, so have the big names in the gold bullion markets who have a vested interest in getting the word out that the big squeeze is over and that, any way, central bankers are standing by to help.
This fascinating battle could well put both a temporary floor and a ceiling on gold.
Meanwhile I am indebted to a knowledgeable reader in Quebec for letting me glance at a copy of the August, 1999, "Gold & Silver Hedge Outlook" by Ted Reeve and Susan Muir of Scotia Capital Markets.
Among other things, I learned from this excellent research document that the following companies did not appear to have any output hedged at the time of publication:
Agnico-Eagle Mines Ltd. (AGE/TSE), Battle Mountain Gold Co., whose exchangeable shares are listed in Canada (BMC/TSE), Boliden Ltd. (BOL/TSE), Cathedral Gold Corp. (CAT/TSE), Franco-Nevada Mining Corp. (FN/TSE), Freeport-McMoRan Copper & Gold Inc. (FCX.A/NYSE), Goldcorp Inc. (G/TSE), High River Gold Mines Ltd. (HRG/TSE), Manhattan Minerals Corp. (MAN/TSE), Miramar Mining Corp. (MAE/TSE), Pioneer Metals Corp. (PSM/TSE) and Repadre Capital Corp. (RPD/TSE).
That does not necessarily make them gold picks. But it is one of many factors to be kept in mind.
Patrick Bloomfield, a Financial Post regular contributor, invests in securities and may hold issues mentioned in the column. |
