End of story on the buy/hold/sell/ignore question, far as i'm concerned, in favour of 'ignore'
This is not the story about ABX I have been discussing. I'm not claiming one should buy Barrick, as I too invest in explorationists and rapidly growing goldies for their leverage. Are you sure you're reading my posts and not someone elses? (gggggggggg)
As far as the hedging debate, I believe it is much ado about nothing. ABX is a small bit player there. The central banks invented forward selling, because without their vaults of hoarded gold, there would be no forward selling. They sell or loan the stuff to free up funds trapped in vaults collecting dust, and costing them plenty in storage, insurance and security charges. Barrick's hedging is done for the time being, as shown in their press releases, so the only effect they have on the POG is in what they produce. If they reduce their hedges, they will support the POG in theory by returning gold to the central bank vault's,... but then the central banks's may just turn around and dump it into the market.
Here's something from Kaplans current report,...
Over the past few years, the Swiss National Bank has sold about 600 tons of gold, feeding about
¾ of a ton to the market, day after day. They have almost reached their halfway mark into their
total sales of 1300 tons.
Barrick produces almost 6 million oz a year, but less than 2 million oz were forward sold in any year or less than 62 metric tonnes per year. So even in the heyday of Barrick's participation in forward selling,...they leased and sold 2 million oz per year or 8000 oz per business day(250). Now compare this to some other stats below and we find Barrick, at its peak of forward selling, sold about 2% of daily or annual fabrication demand, and usually much less. Now compare Barrick's peak forward selling numbers to the daily turnover of gold transactions on London and Comex, and you will see that Barrick's 8000 oz per day amounted to 0.02 percent of total daily trading, a very insignificant number.
Barricks total Au oz sold forward is currently 18 million oz or 558 metric tonnes of gold total, and in a rising gold environment this will be slowly returned to the central banks supporting the POG, in theory. The 18 million oz Au forward sold represent only 3 years of production, or 0.6% of total world fabrication demand in that 3 year period. Any swings in price caused solely by Barrick are temporary and transitory, and represent only 0.007 percent of total trading in gold contracts over the next 3 years on London and Comex based on the figures below.
Speculators are the real force in determining POG,...Barrick is a very small bit player in the play.
http://www.blanchardonline.com/Beru/bulletin22.html
1. The Bank of England sales are small relative to the total gold market.
28,342,157 ounces per day: average London Bullion Market Association transaction volume, January - May 1999.
4,074,926 ounces per day: average gold turnover in the Comex gold futures contract, January - May 1999.
271,000 ounces per day: average daily 1999 mine production (based on 250 business days/year).
80,000 ounces per day: average daily 1999 secondary recovery from scrap.
419,200(correction) ounces per day: average daily 1999 fabrication demand for gold.
45,200 ounces per day: average daily 1999 investment demand.
45,600 ounces per day: average daily 1999 central bank sales.
803,000 ounces: Bank of England sales, once every 40 business days.
The bulk of the London and Comex trades are speculative, short-term, and settled for cash - paper trades as opposed to transactions involving physical metal. Some observers point this out, saying that you cannot compare the two forms of transactions. While that is true on many levels, it would be naive to think that these massive paper trades, accounting for 99% of total market turnover, do not have a price effect. Proprietary traders at major banks and brokerage houses trade gold in lakhs - 100,000 ounce units. Each bimonthly Bank of England sale is equivalent to a handful of trades by major dealers. The Bank's sales are equivalent to 2.8% of average London trading volume, once every 40 trading days. |
