Sorry, I don't mean to beat this to death, but I want to say just a few more things, then I'm done.
First, my last post was a little sloppy. Sorry. I was trying to understand what you were driving at with the "$100" statement. You answered that question unambiguously with "gold could go there again given the correct supply and demand scenario".
Well, I'm not sure what value that statement has. I could say the same thing about bread going back to 5 cents a loaf. But neither will likely happen because those prices are below production costs for the vast majority of producers.
The idea that there are huge easily mined deposits that can be found with the right exploration technology is a pipe dream on the order of $6000/oz gold. Not something to spend a lot of time planning for. For if it did happen, unless ABX partook of the discovery, they would be crushed as well as all the others who didn't find the "Eldorado" mines.
Then there's the Barrick's $360/oz boast. I'm guessing the number is the sum of the POG at the time the forward sales contract was written and the contango. The contracts were presumably written over a multiyear period of time, as were the spread of maturities. Thus this number represents a POG multiyear moving average. The moving average is a great price to fetch during a bear market. But in a bull market, once the moving average is crossed, suddenly it doesn't feel so good.
So to summarize the best unhedged case I can make:
1) Gold is a storehouse of value. It retains its value over long time horizons, even if it fluctuates short term.
2) When it fluctuates to cheap (<$300), buy.
3) When it fluctuates to expensive (>$600), sell.
4) Fuggitabout "Eldorado". It has extremely low probability.
5) All bull and bear markets end eventually. The gold bear market is over, judging by the charts.
6) Gold won't go below production cost unless CB's dump big time. But that would validate the conspiracy case and lead to a major reaction once the dump was over.
7) Given the outstanding short interest in a rising market, there is a significant chance of a short squeeze on POG.
8) Even if there is no squeeze, by the time POG crosses the $365 moving average price, ABX's upside will be behind it, as its hedgebook will then be a drag on its profits.
9) Forward sales hedging is akin to eating your young. If producers must hedge, they should buy puts. That way they retain the entire POG upside.
10) 15 years of forward sales is a joke. It is a massive no confidence vote against your own business's chances of revenue growth.
11) Last, but not least, a management that owns little or none of its own stock is one that cast a massive no confidence vote against their own business. They don't deserve to be there. |
