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Gold/Mining/Energy : Gold Price Monitor
GDXJ 109.23+3.7%Nov 28 4:00 PM EST
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To: Crimson Ghost who wrote (49643)2/25/2000 8:30:00 PM
From: Ken Benes  Read Replies (3) of 116786
 
A very good note. I recognize that there are exceptions within the producers. I made the note more general as not to focus entirely on one company.

Because of the lack of elasticity in the gold market, it was a given that prices above 300.00 would meet resistance. For this reason , it is untimely to announce any increase in production. The producers have an uncanny ability to shoot themselves in the foot. As the price of gold was declining, they increased supply thru forward selling putting more pressure on the pog. Now that prices are beginning to recover and forward selling has abated, some producers are increasing supply by bringing new mines on line. It is difficult to comprehend the complete lack of planning associated with this. What they should be doing is decreasing supply, which can be done with little loss of revenue. Close out existing gold loans with current production, liquidating the counterpart bonds that were associated with the loans. Many hundreds of tonnes of production can be removed from the market in this way. Instead, barrick buys calls to offset their short position and increases production, and this is supposed to be smart. You can fool some of the people some of the time, but you cannot fool all of the people all of the time. Investors have barricks number and are voting with their shares.

Ken
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