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Gold/Mining/Energy : Gold and Silver Mining Stocks
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To: goldsheet who wrote (2296)9/21/2001 2:42:03 PM
From: russwinter  Read Replies (1) of 4051
 
<what effect would it have on physical gold demand >

The effect will be on the paper market that has been such as problem for POG, and it's really quite simple. A purchase of a forward contract is demand, and if you get enough of that you swamp paper sellers.

<if they did deliver gold wouldn't the bullion bank just resell it for cash with a net effect on the physical market of zero ?>

The bullion bank is simply the intermediary, there would be no more transactions, and the "real" gold (if it could actually be located) would be sent back to the CB account, unless the banker could find another party (another producer and short seller) to carry on.

<Maybe the long-term scenario is for central banks to stop selling physical gold (BOE, etc..) and just convert these outstanding gold loans into sales.>

That kind of presumes these CB's want to continue to sell gold, or turn gold into someone else's liability. What do they want as proceeds of these gold sales, more US$? What's so wonderful about that asset? IMO, that theory of CB "gold management" is going to be severely tested. Personally I think some will never get the gold back from these busted counterparties.

Bob, I'm surprised you haven't sat down and carefully read through the classic John Hathaway or James Grant work on this whole subject. They are not lightweights (too much static in some of the GATA work) at all, and it might get you better informed about this extraordinary story, than my two liners here.
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