Dan, et al,
I missed last week but I doubt that anyone missed seeing the GMI update. In any event I've posted last week's data along with this week's below. Gold and PMs received a lot of attention in Barron's and the NYT this week. My favorite economist, Epstein, reviewed commodities, including PMs, in a special this week and Barrick was the subject of article in the NYT. The Barron's article had a bullish tone for PMs and the NYT article included a discussion of hedging, the carry trade and suit being brought by Blanchard. et. al. The two paragraphs that describe a carry trade/hedging combine ware:
"Barrick insists — and numerous analysts agree — that its strategy is far simpler and more adaptive to market conditions than investors seem to believe. It begins with a contract between Barrick and a large bullion dealer, like Citigroup or J. P. Morgan Chase. Under the terms of the contract, Barrick is required to deliver gold at some future date. The contract, known as spot deferred, allows Barrick to postpone delivery, however, for up to 15 years.
With the contract in place, the bullion dealer then leases that same amount of gold from a central bank, selling it in the spot market. The dealer then effectively places the cash from the sale on deposit, where it earns interest. During the contract’s life, the dealer pays interest to the central bank as a fee for borrowing the gold. Once Barrick delivers the gold, it receives the cash from the spot sale and the accumulated interest, less the lease rate and certain fees paid to the dealer."
The discussion makes it appear as though no one could get hurt. Amazing.
The relationship of the POG leases rates continues to be a bit ambiguous though the tendency to move in the same direction seems evident.
The GMI/POG ratio:
On 02/20, the Barron's GMI was at 467.48, down from the previous week's 470.86. With the POG down at 352,30(02/21), the ratio held at 1.33.
On 02/27, the Barron's GMI was at 441.50, down from the previous week's 467.48. With the POG down at 347.45(02/28), the ratio was down at 1.27.
The ratio a year previously was 1.28, nearly the same.
Cheers,
Larry |
