The gold producers should carefully monitor the events occurring in the oil markets. The US and the press is attempting to jawbone the producers to increase production to offset the high prices resulting from opec's ability to limit production. The same kind of pressure is building on the producers to begin a new round of forward sales to smooth out cash flow. Should the producers cave and make new supplies of gold available for forward sales, the one certainty, the price of gold will be smooth down. The beneficiaries, the leveraged producers, bullion bankers, and the central bankers with an agenda to talk down the specter of inflation. The losers, the owners of gold mining shares. Be very careful which companies you invest in. Pressure the producers to resist forward selling. The Mexicans were beginning to play the increase oil production until, they heard from their constituents who made it loud and clear, it is too early to increase the production of crude. Gold, while beginning a price recovery, is so far behind the oil market that any discussion of forwards sales is ludicrous. Barrick along with the australian producers will be the ones to pull the rug from under the market. It is up to the shareholders and potential shareholders to offset the ambiquity in their positions. Boycott barrick and replace their shares along with the share of the australian producers with those companies that have made a clear commitment to stay out of the forward market for at least a one year period, unless participations is too close out existing positions. It is imperative that the supply of gold to the market be reduced thru an elimination of forward sales, and curtailing the introduction of new mines. Producing one million ounces of gold at +300.00 per ounce is considerable more profitable than producing 1.1 million ounces of gold below 300.00. Just ask the oil producers the difference between last years production of oil at 10 per barrel and this years production (-10%) at 30.00 per barrel. This is first grade math, however, to a gold producer, it is advanced calculus. Unfortunately, the producers hands were made for holding shovels, not pencils. What a tragedy, management of many of those companies lose sleep over not digging holes, rather than having insomnia over the money they are losing thru the holes in their pockets. Do not thrust these guys, keep the pressure on.
Ken |
