To your point on the gold carry trade.
Don't forget that while the central banks accumulated the gold, they were exerting a positive effect of the price of gold by increasing demand for the metal. Now that they are liquidating and loaning the gold to escape the asset shrinking costs of storage, insurance, security, etc., and attempting to invest in things that make a return, it will definitely increase supply of gold and could have a depressing effect on its price if demand stays static. Demand and other supplies have increased in tandem, so I'm not sure what the net effect of central bank sales have been on the POG relative to past years. We can say that if they hadn't occurred, and all else remained equal, the POG should have moved higher. Unfortunately the higher price might have stimulated additional exploration, more mine openings, faster advances in technology, more recycling and possibly a lower price than we have right now.
Indeed, just the fact that the central banks, kings, and the elites have hoarded gold in the past, confers some sort of special status to the metal that might not exist today if they hadn't bothered. If other supposedly indestructible metals or materials were available in similar quantities when the first humans started to collect bits of the yellow metal, would gold have the prestige and value it has right now? This sends us back into this circular argument of what is the intrinsic value of gold. I say nothing because I can't eat it, nor use it for much except decoration. There are few uses I can think of for gold, that some other metal or substance couldn't serve to replace it for at a cheaper cost. So intrinsic, no. A value conferred on it by human beings and only human beings because of their history, yes. A change in the preferred fashion color could drop the demand of gold substantially as 70%+ of gold demand is in jewelry. My wife prefers platinum and red diamonds,....I would prefer a few beers with friends and something good to eat (gggggggggggggg)
To your point about charting the currencies against gold.
I have said before, this is not the correct way to value what gold is worth in other lands any more than it is in North America. Compare gold to other commodities and services in these countries and you will chart a true measure of the value of gold by those humans over time. How many animals can you buy, hours of a type of labor, land, or whatever goods and services you fancy. If an oz of gold bought a suit 200 years ago, and buys a suit today, that tells you what the value of gold has done,.... gone sideways. You ripped my sentence out of the rest of the paragraph, and thus removed its context. "Even in these lands, gold has done little to appreciate over the long term,...dead money. Lots of short term movements up and down, but not something you can count on.",... I'm not talking about gold vs a fiat currency,...I'm talking about golds ability to buy real goods and services.
Now back to Barrick, and this interesting news item. You don't have to take my word for it anymore, Oliphant confirms what I have been saying in public so you can debate with him now.
Barrick Gold CEO Says Its Hedging Doesn't Cap Price
Sun Apr 14,10:35 PM ET
MELBOURNE -(Dow Jones)- Global miner Barrick Gold (NYSE: ABX - news) Corp.'s (ABX) constantly revolving hedge position doesn't place any ceiling on a rising gold price, Randall Oliphant, the company's chief executive and president, said Monday.
Barrick will sell half of its annual production in 2002 at a minimum price of U$365 an ounce, with the balance sold on the spot market, he told the Australian Gold Conference.
The company produced 6 million ounces of gold in 2001, and expects to produce 5.7 million ounces in 2002 at a cash cost of US$167 an ounce, he said. The company is the second-largest gold producer in Australia .
Oliphant said Barrick maintains a hedge position of around 18 million ounces.
"We deliver and then add new contracts at about the same rate as we would if we were an unhedged producer," he told reporters at the conference.
Therefore Barrick will deliver about 2.8 million ounces against its hedge position and replace that with exactly the same number of hedged ounces, he said.
"We don't think that has any detrimental impact on the price," he said.
Indeed, the strategy is a "prudent decision," he said.
"We like the predictability of our earnings and cash flow, we like the idea of getting paid a premium to reduce risk," he said.
At the same time, the company has plenty of upside to the price of gold, with more than 60 million ounces of unhedged gold reserves,, he said.
Each U$10 an ounce rise in the price of gold is worth US$600 million to Barrick, he said.
The company's hedge strategy has delivered more than US$2 billion of extra earnings, enabling it to build mines, acquire more assets and give more leverage to the gold price, he said.
"For our company, we've got the right mix between downside protection (and) income earning power," he said.
-By Ray Brindal, Dow Jones Newswires; 61-0418-417-104; ray.brindal@ dowjones.com
http://story.news.yahoo.com/news?tmpl=story&cid=808&ncid=808&e=2&u=/dowjones/20020415/bs_dowjones/barrick_gold_ceo_says_its_hedging_doesn_t_cap_price |
