The article you posted is dated Jan. 9, 1998. Gosh I'm real dumb so I must not
know that today is May 15th and that today isn't Jan. 9th. I guess gold doesn't trade
daily. Its price was fixed on Jan. 9th and I'm so happy to hear you found the last
valid quote.
May 15, 1998
Increased Production Compounds Problems for Gold
Related Article
Spot Gold Price Is Under $280 Briefly (Jan. 9)
By JONATHAN FUERBRINGER
o wonder gold is in trouble. Last year, when the price of gold plunged below $300 an ounce
to an 18-year low, what did the world's gold mines do? They produced more gold.
Total production rose 4.6 percent, or 118 tons of gold, to a record 2,716.5 tons, according to Gold
1998, the closely watched annual report on the industry produced by Gold Fields Mineral Services
Ltd.
The United States and Australia led the charge, adding 48.5 tons to production from mines that "had
been in the pipeline during the previous two to three years," Gold Fields said.
The new production indicated how many things must change before the forces that have kept gold in
a general decline for years can be reversed. For the price of gold "to go up again, we have to lose
mine production," said Philip Klapwijk, the senior metals analyst at Gold Fields.
Although it added to the downward pressure on gold prices, the additional production was not the
chief cause for gold's decline, to a low of $283 an ounce in London on Dec. 12 and a further drop,
to $278.70 an ounce, on Jan. 9.
The main problems for gold were the same as the year before, but worse: selling and lending of gold
by the world's central banks; increased hedging by producers in an attempt to lock in higher gold
prices, and the continued downward pressure from investors and hedge funds that have sold gold
short, betting that its price would decline.
Shorting is done by borrowing the gold, selling it and then profiting when the gold is repurchased at
a lower price and the loan is paid off.
Net selling by central banks increased to 447.6 tons, a jump of almost 50 percent. And each
announced sale rattled the market, sending prices lower. At the same time, central bank lending of
gold climbed sharply higher as the borrowed gold was used in hedging deals for producers, shorting
of gold by speculators and selling of options by dealers. By Gold Fields' estimates, this lending
added 661.5 tons of gold to what was being traded last year.
Klapwijk said in an interview that these forces should continue to be negative for gold this year. But
he noted that the downward pressure had abated a little in the first four months of the year, as the
price of gold jumped to a recent high of $313.15 an ounce near the end of April.
But since then, the price has fallen below $300 again. On the Commodity Exchange, gold for June
delivery closed at $299.70 an ounce Thursday, up 50 cents. It hit $298.90 on Tuesday.
The threat of more central bank sales is likely to continue to haunt the market until the new European
central bank is operating and there is some agreement among the 11 countries that are part of the
new single currency, the euro, on what the former national central banks should do with the rest of
their gold reserves.
The 11 countries now hold about 14,222.3 tons of gold. The new European central bank is
expected to have 5 percent to 25 percent of its reserves in gold. If the former national central banks
moved to that ratio, it would mean a sweeping selloff of gold.
"If they were to do that, that would be bad for the gold market," Klapwijk said. But he said he did
not expect the central banks to go so far.
What would help the market, however, is some defined policy that would let investors know how
much gold will be sold in the transition to the new European central bank and over what period of
time, he said.
And since I don't own any Novell Puts perhaps you got me mixed up with Bork2,
Argon37, thefatuousone, or any of your other "friends" in cyberspace to whom you
trade bubblegum cards.
Thanks Paul you provide information of high quality!
Okay I will be constructive. You hold which Calls? Or you sold which covered
Calls? Or you sold Puts? Share with us your trading strategy.
Paul, I don't have to unless you ask properly.
Now take it easy will you. You seem to be intelligent
enough take a deep breath and smile!
Cordially
VD |
