Couldn't happen to a more deserving bunch of crooks.
"I see $340 and $360 an ounce as the danger zone for banks, that is where hedging and the hedge book problems start to have an impact," said Ian McAvity, editor of Toronto newsletter Deliberations on World Markets and a director of gold and silver closed-end fund Central Fund of Canada (CEF: news, chart, profile). "I expect to see a $25 up day for gold one day, largely due to someone getting skewered by their hedge book, either the bank that extended it or the mining company."
A rapidly rising gold price is the worst enemy of hedged miners and the banks that designed their derivative strategies. A powerful gold rally could force some miners, or the banks behind the hedge books, to engage in a mad scramble to locate gold and deliver it to the original lenders.
McAvity points to the largest investment banks, among them JP Morgan Chase (JPM: news, chart, profile), as facing the most risk from the continuing gold rally. Gold's spot price is up about 20 percent since Jan. 2. Figures from the Office of the Comptroller of the Currency show JP Morgan Chase having the largest exposure to gold derivatives among U.S. banks and trusts, as of Dec. 31. |
