Yeh Enigma, you have already clearly showed how little you know..
10/25 Dr. Charles K. LaMont - Mega Gold Producer Pushing Gold Lower
Mega Gold Producer
Pushing
Gold Lower?
By
Dr. Charles K. LaMont, Ph.D.
Economist
If I had suggested a few years ago that gold's worst enemy, in the birth of gold greatest ever bull market, was going to turn out to be a major gold producer you would have laughed. Well, this is no laughing matter. Barrick's short position in gold via deferred spot hit a high of 17,000,000 ounces. That is a horrific amount of gold to feed into the market but they did. Clearly, all that gold ended up in Asian/Islamic hands but think what it would have meant to the market if Barrick did not do that. You would think that the huge problems of public companies concerning the use off balance sheet financing would have put Barrick on their guard but apparently not. The size of Barrick's derivative financing qualifies as historically huge off balance sheet activity with immense risk. Barrick makes a big deal of being a company with almost one billion dollars in the treasury and no debt. Well, they have no debt on the books but they have huge obligations going forward as the price of gold rises. A short position of 17,000,000 oz., their recent high short position, means that they are short the equivalent of 170,000 Comex gold contracts, which makes or loses $17,000,000 for every dollar the gold price moves.
Therefore Barrick has 17,000,000 reasons for every dollar to want to see the value of their final product go down and down and down. It is amazing that gold is so strong as to be able to handle that kind of abuse.
Now that Newmont has properly accounted for the margin requirement of what is called "no margin" gold derivative by increasing their long-term debt, I believe Barrick will be forced to follow. Don't fool yourself that you can have a position of short 170,000 equivalent of Comex contracts short on a handshake. That is an illusion. Yes, you can make a deal today to finance the difference between the price at which you sell and the market price forward but in time you will have to acknowledge that financing on your balance sheet. Yes, you can hide your losses in the billions by reducing the sale price of the gold sold forward on your books but eventually when you deliver the gold you will take "the hit" by selling at the reduced price.
This is as fancy a game of financial engineering as has ever existed. It is apparent to me that Barrick intends to do everything in their power to depress the gold price and will not stop. This is that stone wall gold has been hitting which seemed inexplicable. There is only one thing that can stop Barrick and that is stockholder's rights. If Barrick shareholders do not "scream bloody murder" as they say, then they deserve what they are going to get, in my opinion. A shareholder of a gold company selects to be there to enjoy the increased value of their share in a bull market. This is an example of management running wild with a scenario very different to the one preferred by their shareholders. As far as buying Barrick on reaction, forget that. To buy Barrick is to vote for lower gold. The biggest risk here is that Barrick could push gold a bit too far and change the gold charts to bearish which would cause technicians and clients into a sell mode. Some may say "Thank God for Hung Fat & Dr. No" who will eventually "clean Barrick's clock" in street terms. It must appear to some that Barrick's ego is taller than Mt. Everest. In my view they are likely to be disgraced by what they are doing.
Barrick is a great company that could have gone to even greater heights but ABX has seemingly squared off against Asian/Islamic rivals. Has ABX declared war on the Gold Dinar? Here is where the fight between the North American/British interest and Asian/Islamic interest will be most intense, not on the ground in Iraq. Here is where the North American/British financial interest is most vulnerable.
You need to study the Islamic writings on gold as money to know that this battle is going to occur quite soon. This is going to be a battle to the financial death and that is what a public company is risking. One wonders if this is a product of a certain very influential Barrick director? Transparency sometimes appears without help. Is Barrick a Trojan horse inside our gold bull market walls? |
