(This article by Bill Murphy starts at post #410 and reads in sequence to #417)
It is not just Placer Dome that has issued a challenge
to other gold producers:
"Gold Fields slams industry hedge addiction.
"By Darren Schuettler
"Johannesburg, Feb. 3 (Reuters) -- Gold Fields Ltd.,
the world's second biggest gold producer, said on
Thursday it was insane for companies to keep major
hedge books that had depressed gold prices and made new
projects uneconomic.
"Gold Fields, which bought back the bulk of its hedges
last year, also urged institutional investors to
pressure companies to ween themselves off hedging.
"'I don't think hedging is appropriate at the level and
the scale it has developed in the mining industry,"
Gold Fields Chairman Chris Thompson told analysts after
releasing the company's quarterly results.
"'To sell ounces in the ground at $270-$280 (an ounce)
when the price of replacing them is $350 (an ounce) or
better is just insane."
"Thompson has publicly criticized the industry's
hedging practices since Gold Fields repurchased most of
the 1.8 million ounces committed to forward sales and
call options.
"The company still has about 200,000 ounces of forward
sales required for its Tarkwa gold project in Ghana.
"Thompson said he was not opposed to hedging to protect
particular assets or if it were required by lenders to
fund a project. But the industry's level of hedging was
out of control.
"'When it gets to a scale where the top 10 mining
companies in the world have over 70 million ounces
hedged ... it has led to a lower and lower gold price.
"'If we collectively continue to do that, we're going
to ensure that no new mines are developed and ... you
actually have to write down reserves."
"Gold Fields had seen its mineral reserves fall to
about 74 million ounces from more than 90 million due
to the lower gold price, he said.
"'I think it's time the institutional investment
community point that out to the mines, that they
shouldn't do it. It's not in our interest.'"
"Thompson said the industry should take a broader view
of the market. 'It involves looking at overall industry
and community attitudes to gold and the image of
gold.'"
"He said it was still very difficult for the public to
buy gold, noting that the recent UK gold auction was
largely restricted to institutions.
"'There is a lot we need to do as an industry to start
to look at making gold available to the public and
create a market for it,' he said."
This kind of talk is what Barrick is going to hear from
the gold fund managers attending its financial meeting
on Monday.
Three days ago most establishment gold analysts were
all neutral to bearish about gold. You could find nary
a soul in the media citing bullish gold market
commentary. Now the establishment crowd is scrambling
to come up with reasons for the new bullish scenario.
Placer Dome's announcement is about the best they can
do.
Normal markets do not trade as gold has done recently.
Trade into oblivion in the $250s; explode $84; go back
to dullsville trading $50 off its October highs; and
then trade up $23 in a day out of nowhere.
If you don't understand or start from the premise that
the gold market has been manipulated by certain bullion
dealers and, most likely, the U.S. government, then you
are clueless about what is going on here.
Unfortunately, that encompasses almost all of
mainstream gold analysts and gold market press. We know
that is the case because even the possibility of a gold
market manipulation is seldom mentioned in most
publications and they won't even print the name "GATA."
As proof for what I am saying, note what two recent
gold price runups have in common. Both involve events
that affected the bullion dealers. The first runup was
due to the surprise Washington Agreement that limited
European gold sales and lending, and the second was
accompanied by the omnipresent market talk that two of
the most important bullion dealers involved in the
manipulation (Goldman Sachs and Deutsche Bank) had
massive bond trading losses because of the swift
inversion of the yield curve.
As I reported Friday, Goldman was buying gold futures
and gold options in panic fashion. Why?
>From Cafe member John M.:
"I heard from the guys at Bema Gold that they heard
that a fight broke out between Goldman's traders and
another group of traders. Goldman was trying to buy
Gold and the other group, possibly Mitsu, was trying to
keep a lid on the price and knock it. But fighting on
the commodity floor may be normal, I don't know."
The bullion dealers have been manipulating the gold
because for years they have been making a fortune with
the gold carry trade. Borrowing gold from central banks
at 1 percent interest, selling the gold in the physical
market, and investing the proceeds in the financial
markets. Rumors surfaced yesterday that the Goldman
carry trade was blowing up.
>From a Cafe member in South Africa:
"Strong rumors abound that Goldman has taken over the
Ashanti hedge book and has started to dismantle it."
Goldman Sachs was Ashanti's main investment adviser and
received very bad publicity in the Financial Times for
its conflict of interest there, so who else do you
think is on the hook in the end for Ashanti's problems?
Remember, way back in October and days after the
Ashanti blowup, I reported to you that Ashanti Chairman
Sam Jonah told a Cafe colleague that "Goldman is
squeezing our b's."
(This article is continued on post #415) |
