Forwarding an analysis of the gold market which may be central to market direction:
Subject:
Harry Bingham - Gold Market Commentary / MINI MIDAS - Today's Action
Date:
Mon, 7 Feb 2000 21:32:37 -0500
From:
LePatron@LeMetropoleCafe.com
Le Metropole members,
Harry Bingham has served his usual tasty
"Weekly Gold Market Commentary" at The
Man Ray Table.
"Primary market conditions are reversing. More
and more newly mined gold will be delivered into
hedge books and returned to central bank vaults.
Less newly mined gold will come to market then
is actually produced. The daily activity of gold
producers and bankers is being transformed from
a negative to a positive market influence before
our eyes. The coiled spring may be set to snap as
the huge physical short position becomes
increasingly burdensome in an increasingly
tightening market."
MINI MIDAS
Today's action:
The Caf‚ information that Barrick Gold would
make an announcement today and that it would
include prior buybacks was right on the money.
Barrick made that announcement and the gold
market dropped $8.50. I will do my best to
try and sort this out in as simplistic fashion
as I can.
No matter how you slice it - at the end of the
day - this market is explosive. As GATA's Chris
Powell says, today's set back was a gift. The
market is telegraphing where it wants to go and
that is much much higher in price. Markets do
not spike sharply higher like they have these
past two months for no good reason.
This is what Barrick had to say today in a
Bloomberg release:
"Barrick Gold Corp., the world's No. 4 gold
producer, said it reduced the amount of gold it
arranged to sell forward by almost half in the
fourth quarter, though it remains committed to
its hedging strategy.
"The Toronto-based company said the amount of
gold it sold for delivery later at prearranged
prices was reduced to 9.8 million ounces in the
fourth quarter from 18.8 million ounces at the
end of the third quarter.
"Barrick also said it bought call options that
cover 100% of its production from March 2000
to 2001."
To the great novelist and Caf‚ member, Arthur Hailey:
I have a vintage red wine breathing on the dinner
table and several of us are toasting you tonite.
Congratulations on what you were able to accomplish
via your letter to Barrick Gold that received so
much world wide attention. A wink and a smile
goes with that toast.
In addition to Barrick's announcement, Australia's
largest gold miner, Normandy Mining Ltd. said today
that it had not entered into any new hedging
contracts in almost two months.
Anglogold announced today that is had been lightening
its hedge book during the past four months and would
continue to do so.
Agnico-Eagle publicly confirmed its policy of not
selling any of its future gold production forward.
Question: if all these producers were not selling
forward and Barrick covered a significant part of
its hedge exposure, who was selling last gold these
past 3 months to keep the gold price below $290?
Time and time again, the press said it was producer
selling. Midas said nonsense and honestly these
announcements prove me right. How often did you
hear me say it made no sense for the heavily hedged
producers to remain so short and that shareholder
pressure would prevail, not the least of which
would come from the Ashanti blow up.
>From the very visible and widely quoted Andy Smith
of Mitsui, in a Reuters comment: "We have the
shareholders pressure now, people-power against
hedging that we did not have in October."
Andy, I know you disagree with a great deal of
what GATA believes, but part of that people-power
pressure came about as a result of the GATA army
and some of our tactics such as the surprise fax
attack on the big hedgers at the Denver Gold Group
Conference in October.
The TV commentary said Barrick's announcement was
a disappointment. That is why the market went down
is what they reported. How so? Few knew they were
even going to make an announcement, remember.
If a birdie had said last week that Barrick gold
was covering half of its hedges in some manner,
accompanied by all these other announcements by
other major gold producers, almost anyone would
have said the price of gold would be streaking
for the moon by now.
There is only one explanation why gold is not
$350 or $400 bid now. Clear as day. Some sector
of the United States government and a small clique
of bullion dealers will not let it do so as they
(or clients they advise) are massively short and
that a sharp rise in the gold price would devastate
their manipulation game, causing economic ruin
to some.
The producers are buying, or at least, not selling.
The open interest on Comex went up 10,000 contracts
yesterday which suggest the specs have come in on
the long side. So who is keeping the price of gold
from exploding? Who has been selling these past
months while the producers buy back their shorts
or deliver into their hedges, thereby reducing
selling pressure?
The lack of producer gold supply pressure is why
the least rates sank to the lowest levels in memory
these past months. Interestingly, they shot up today,
with the one month rate doubling overnite to .85,
which is still low.
In earlier emails today, the Caf‚ was extremely
pleased that we were able to bring you a window into
the mind of Frank Veneroso, who I believe understands
the gold market fundamentals better than anyone else
in the world. His clients pay him $8,000 per year
for that window. He can grasp the big picture and
the essence of what is going on behind the scenes
in a market better than anyone I know. I have seen
Frank win the day in the END time and time again
over the last 21 years.
If you have been able to read his commentaries, you
know how bullish he is, in time, and why. (It is
Frank that believes the natural equilibrium price
of gold today is $600 per ounce.) You also know
that we both agree there is powerful force out
there trying to hold the gold price down. Yes,
MANIPULATING the gold price to suit their own
interests.
The respected broker Keith Goode of Bell Securities
in Australia told Reuters today, "Everyone's trying
to work out just why gold is running up."
Caf‚ members know why! We also know the free market
gold price is hundreds of dollars higher than what
it is being ALLOWED to trade at the moment.
The producers are covering (or not selling), the
European central banks are restricting selling,
the specs are going long. Then, as said earlier,
it is of the highest probability that certain
bullion dealers and a segment of U.S. officialdom,
desperate to hold down the gold price, is doing
the dirty deed of capping that price.
In my opinion, a financial scandal of epic
proportions will be revealed in the not too distant
future because so many people in the gold industry
were made to suffer at the expense of a faction of
the U.S. government and a cabal of bullion banks
in New York.
Long time Caf‚ members: remember "Scandale Gold"
written 15 months ago. Little by little that
"scandale" is surfacing.
Bottom line. I love the junior, smaller gold
companies. Even the seniors are a steal as the
XAU at 65 plus is not that far off lows with gold
ABOVE $300. Wow, even Rodney Dangerfield would
be embarrassed at the lack of respect the shares
of gold companies have today.
That will change. Buys of a lifetime are staring
at us in the face.
P.S. - if you check the last gold spike in late Sep.,
you will notice the market sold off after its first
big run up like it did today, then roared up to
make new highs at $339 basis the lead futures
contract.
Also, as mentioned in the last Midas, Peter Munk,
Chairman of Barrick Gold, will be on CNBC tomorrow
in the A.M.
Sweet dreams.
<A HREF="http://www.LeMetropoleCafe.com/scripts/products.cfm">Le Metropole Cafe</A>
All the best,
Bill Murphy
Le Patron
www.LeMetropoleCafe.com |
