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To: Knighty Tin who wrote (176410)6/29/2002 12:17:25 PM
From: mishedlo  Read Replies (1) of 436258
 
Kt someone asked me if I understood the mecahnics behind the POG drop. Question in italics, followed by my comments. Your comments would be appreciated.

Do you understand the mechanics behind this drop in the POG? When you say someone wants it to drop pretty badly, who is this and why and how are they making this happen. If they can keep the price down and want it down, then can't they also prevent it from hitting $330 again as you are hoping for once you re-enter your positions near the $300-310 range?

The "mechanics" behind the drop.
That one is easy.
Sell gold at an illiquid time while buying the US$ at the same time, perferably while the US stock markets are headed up or appear to be headed up.

Why?
Cause the central banks and COTs are short tons of gold thats why.
Loaned it out. At prices above $300/oz, gold loans as well as gold mine hedgers are are losing big bucks.
COTs (commercial traders are hugely short gold. Had gold taken out 340 and held, someone would have been sweating bullets big time. A rising price of gold is viewed by some as some sort of threat to the US economy. So stupid. It is a threat only cause we are short tons of gold. Go figure!

Can they prevent it from hitting $330 again.
Well I suppoose you can only short so much gold that there is no more to short. Then if someone who owns the gold demands physical delivery, guess what the H happens? I am waiting for this to happen. The more you try and force something to happen the bigger the potential failure when the derrivative mess blows up in your face.

Now this might happen or it might be "contained". The best way to prevent it would be for the banks to cover their short positions on this manipulated drop in POG and just let the market decide what POG should be.

Is that my expectation? No. I expect the morons to hold onto this short position forever. I expect a huge failure at some point and if it happens I hope JPM or whoever goes insolvent. Won't that be fun? The end result might be the US government buying gold mine companies right at the top, then selling gold for whatever price they want. Of course the value of those gold mine companies will drop like a rock.

M
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