Franco-Nevada (FN - TSE) - zero debt, cash rich royalty co. Message Board

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Gold/Mining/Energy : Franco-Nevada (FN - TSE) - zero debt, cash rich royalty co.

FN 459.60

+3.7%

Nov 4 4:00 PM EST

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To: Tom Gordon who wrote (427)	5/20/2001 7:22:00 AM
From: Tom Gordon	Read Replies (1) of 511

Folks, these are some interesting tidbits and undercurrents occurring in todays gold markets. Bullion Banks that are highly leveraged with gold derivatives and the biggest of all are J.P.Morgan, Chase,and Citibank all of the U.S. and Deutsche Bank the foreign entity which acquired Bankers Trust in 99. These bullion banks borrow gold from the Central Banks and in turn lend the gold out in forms of derivatives for investment purposes.The gold lent out by the BB's still remains on the CB's books as paper assests. When the CB's calls these loans, because of upward pressure of rising gold prices, the borrower has to scramble to cover this loan with call options or buying physical gold that there presently is an rather impressive shortage relative to the derivative positions. Also many of these borrowers( such as AU producers) delta hedge from protection to safeguard from this possibility. A note, these bullion loans come at very low payments of interest,(lease rates) much of this $$$$ went in to fuel the securities balloon. Since the price of gold is or is about to explode, this is an achilles heel for these derivatives.They are currently losing market liquidity because a vast majority have been in the form of shorts, that of which now have to be covered. Greenspan knows that this is a ticking time bomb at hand. This has the possibility of making the LTCM incident pale in comparison which he hopes doesn't turn into a financial nightmare. This is only a small excerpt of what is transpiring in this gold market, so, you might want to fasten your seatbelt, this is all hittin the fan. Regards TG.

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