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Strategies & Market Trends : Zeev's Turnips - No Politics

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To: Steve Lee who started this subject	2/10/2002 9:15:49 PM
From: Teri Garner	of 99280

All That Glitters Is Not Gold From the March, 4 issue; posted Feb. 8, 2002 By Kelly Patricia O’Meara Wall Street insiders speculate that if the gold market were to rise Morgan Chase could be in serious financial difficulty because of its "short positions" in gold. In other words, if the price of gold were to increase substantially, Morgan Chase and other bullion banks that are highly leveraged in gold would have trouble covering their liabilities. One financial analyst, who asked not to be identified, explained the situation this way: "Gold is borrowed by Morgan Chase from the Bank of England at 1 percent interest and then Morgan Chase sells the gold on the open market, then reinvests the proceeds into interest-bearing vehicles at maybe 6 percent. At some point, though, Morgan Chase must return the borrowed gold to the Bank of England, and if the price of gold were significantly to increase during any point in this process, it would make it prohibitive and potentially ruinous to repay the gold." insightmag.com

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