Heinz on gold and Silver
Date: Thu May 13 2004 10:20
trotsky (kapex, 7:34) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
Wallenwein's assertion that 'gold stocks threaten the financial order' outs him as a total wingnut, not it was really required....he has made silmilar fantastic claims in the past.
you know how much the establishment cares about a stock market sub sector whose total, GLOBAL market capitalization is 1/3 of that of MSFT?
that's right, they don't give a fig...and gold stocks threaten nothing and no-one. they sold off because they were previously overbought and apparently discounting a higher PoG that didn't eventuate. they do this regularly btw. , happens about once a year
Date: Thu May 13 2004 10:12
trotsky (Mee 7:23) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"Everybody is negative the dollar..."
actually, the opposite is true. the major point of debate w.r.t. the dollar these days is 'how high will it go'. this is amply reflected in the positioning of speculators in the currency futures, where they e.g. hold a 2:1 short to long position in the Swiss Franc ( big speculators actually are short at a 7:1 ratio ) , 2:1 in the Can dollar, 4:1 in the Mexican Peso, while their net long positions in the pound, the Yen and the Euro are at their lowest levels in at least 2 years ( in spite of the interest rate spread that favors these currencies ) .
so it is simply wrong to assume that the almost universal bearish sentiment on the dollar that was evident at the beginning of the year still exists. everybody seems to think that OTHER market participants are dollar bearish, and thus wants to be a contrarian bull. but in reality, it isn't the contrarian position anymore.
the question shouldn't be 'how high will it go', but 'when will it resume its fall, how low will it go in the next down leg, and is it really true that it DOESN'T MATTER'.
Date: Thu May 13 2004 09:55
trotsky (jims, 7:01) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
it could be done WITH or WITHOUT the dumping of leased silver, but it seems very likely that leased silver DOES play a role to some extent.
let us say miner X wants to sell forward 10m. oz. for one year and contacts bullion bank Y. as soon as the bullion bank provides an otc derivatives contract to the miner ( who is now short silver ) , it is automatically the 'counterparty' to the contract, and thus long. however, the bullion bank normally doesn't WANT to be exposed to silver price risk. it only wants to make money on spreads and commissions. so it has now two possibilities: it either finds a private or CB silver holder who is willing to LEND silver for the specified time of the contract, and sells it immideately in the market ( the leasing option ) , which creates an offsetting de facto short position against its long position, or it goes to COMEX, or another silver otc derivatives desk and hedges the risk there ( again, by going short a commensurate amount ) . thus the bullion bank ends with a position that is neutral, the miner is short, and a fabricator or speculator is long.
it is not unreasonable to assume that such contractual obligations run indeed into hundreds of millions of ounces, so the apparently outrageous size of the commercial hedger short position at the COMEX could well at least be partly be explained by that. note that contrary to TB's assertion that one is 'supposed' to not hedge beyond one year's worth of production, there is nothing that stops miners from hedging much further out. an example would be Barrick and also Placer, both of whom have some hedges going out 15 years. it may not be REASONABLE to put on such hedges, but it CAN, and IS being done |
