Re. Gold - see the writing on the wall for yourself!
There was intense pressure to keep gold under 290, and BoE was at it again. Why don't these bozos leave the marrkets on their own - let the strong survive. [I heard that Goldman was in deep kimshee because of gold hedging they have done. Perhaps the major short fall in the 2.2 mil ounces was for accounts with Goldman or for Goldman.]
Don't you love it when the western world preaches the virtues of free markets to the developing world? Ironically free markets were actually practiced in the third world which is the reason why a run on their currencies happened.
infoseek.go.com
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FOCUS-Gyrating gold anxiously eyes option
action
03:48 a.m. Oct 27, 1999 Eastern
By Michael Byrnes
SYDNEY, Oct 27 (Reuters) - Erratic gyrations in gold prices,
which have seen the metal lose most of last month's gains, have
left players confused as they anxiously eye the imminent expiry
of call options covering millions of ounces.
The volatile precious metal surprised again on Wednesday by
falling quickly from the start of trade in Australia, the first of the
new day, by around US$2 an ounce to a low of $286.50/7.50.
However, prices turned around to rise to US$291.50/3.50 by
5.00 p.m. (0700 GMT) compared with bullion's close in New
York at $288.40/0.40 on Tuesday.
Gold's fickleness has some Australian bullion dealers racing to
keep up with the market.
''I don't think they really know what to do,'' Keith Goode of
Bell Securities, one of Australia's top gold analysts, said of the
hedging strategies of Australian gold producers. ''I'd be
surprised if people start adding to their positions (with gold)
bouncing around all over the place.''
The falling market is good for producers who sold forward
when the price was recently high, but bad for those who did not.
DANCING IN THE STREETS ON A PRICE FALL
''They dance in the street when the price falls because of their
hedge positions,'' Goode said of the dominant position of
Australian producers.
But gold is far more complicated than this.
Analysts see the UK as being worried about the fate of
Commonwealth member country Ghana, whose largest gold
producer Ashanti Goldfields Co Ltd (AGC.GH) has been hit
hard through its hedge book position by September's
unexpected gold price rise.
Ashanti, whose derivatives book was designed to protect
against a fall in the gold price, was plunged into a loss of
US$570 million when gold reached $325 an ounce. Now it
benefits from the falling price.
''In saving Ashanti Gold Mines, it (Britain) saves the Ghanaian
economy. It doesn't want Ghana...to fall over, because
otherwise it's going to have to finance its recovery,'' Goode said.
This increased pressure on the Bank of England to push the
price of gold down, he said.
But the most immediate concern was the expiry of a large
number of ''in the money'' over the counter call options later on
Wednesday.
BIG PLAYS SEEN IN COMING NEW YORK TRADES
On Goode's reckoning, 3.8 million ounces of call options, at a
gold price of US$290.00, fall due for delivery Wednesday night.
That will require the covering of three million ounces, with only
800,000 ounces presently available in the market, he said.
''A three million ounce shortfall has got to come from
somewhere tonight.''
Other analysts said this could account for gold's price partial
recovery on Wednesday.
One reason for gold's sharp price fall on Tuesday night was
pressure by the Bank of England to get the price below $300.
At $300 an ounce, 5.8 million ounces of ''in the money'' over
the counter call options would expire, Goode said.
Peter Upton, senior bullion dealer at Dresdner Kleinwort
Benson, agreed with the figures and saw in them a good reason
why gold lodged at around $290 ahead of the option expiries
later on Wednesday.
But is gold's latest price fall a matter for hand wringing, euphoria
or simple bemusement by producers, who at lower prices simply
see their put options, which allow them to sell at a particular
price, come back into play?
''It's bit of like a catch-22,'' Goode said.
Producers with vulnerable positions would try to reduce their
call options, preferring lower gold prices if they followed the
classic route of selling calls to pay for puts.
But dancing in the streets?
Ounces of gold would be called from producers only if the price
of gold rose. That is why most would prefer lower prices in a
continued volatile market, Goode said.
Upton sees ''mixed interest'' in the price fall by producers.
''The ones that have (hedges) in place are over the moon (with
the price falling). But there are people out there who held on that
little bit too long (before taking out a hedge),'' he said.
((Sydney Newsroom 61-2 93731800, fax 61-2 92624727,
sydney.newsroom+reuters.com))
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