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Gold/Mining/Energy : Gold Price Monitor

GDXJ 98.59

-2.8%

Nov 13 4:00 PM EST

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To: Gabriela Neri who wrote (8566)	3/19/1998 10:58:00 PM
From: Greg Ford	Read Replies (5) of 116759

I also think there will be a bounce. The market is very short. This should be borne out when the Commitment of Traders information next comes out. I however think that gold will have a tough time climbing above the $300 level at least in the short term. It stalled last time at $305. Since that time the market has been supported by producer hedge book buybacks by TVX and Western Mining. Here is where I believe lies part of the problem. The producers which include TVX, Western Mining, Kinross and others which have repurchased their hedge books will be looking to replace the hedges they closed out at prices ranging from $285 to $305. This will put pressure on the price. Other producers who have hedge books will look to replace the hedges they have slowly been taking off (Barrick, Placer, Cambior, South African and Australian Cos) or will look to put on hedges (ie Newmont, Homestake, Battle Mountain). In addition the announcement by Terry Smeeton of the Bank of England suggests that CB will have the entire year to sell any gold which will not form part of EMU reserves or their respect CB reserves. This is also bearish for a recovery of the gold price. What needs to happen for gold to recover. 1. Consolidation of producers resulting in a reduction in mine production, probably form South Africa. 2. Clarification of the EMU reserve policy. 3. Hedge fund buybacks. 4. More producer buybacks and more discipline in putting on new hedges. 5. Higher gold lease rates. 6. More option related business. This means the granting of short and longer term call options which give market players an incentive to move the price higher. 7. Sustain or increase 1997 physical demand for gold. What else would help. A George Soros or Warren Buffet type. Turmoil in the stock market. Trouble in the Middle East or elsewhere. Inflation. Higher interest rates. A weaker US dollar. 310 calls are probably cheap as short term volatility (ie one month is 14%) but they may not warrant the investment at this time. Now silver calls are another story. Good luck in you investing. Greg

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