Thanks For The Article On Derivatives Bobby Y.
That has to be THE BEST article I've read on the subject.
Have (we) not been observing and expressing similar opinions here?I
don't know if it can be considered a positive for Gold,since it
appears possible(Korea?)they have had to sell their Gold to pay of
their bad gambling habits.
This article in todays's G & M (Canada,eh)has some interesting
observations.Gould says the market has already discounted
the possibility of the ECB holding a 10 to 20 percent allocation
in Gold reserves.Hmmmmmmmmmm.....news to moi.I haven't seen a
response in the market to rationalize this statement.Has anyone else?
I mean,the last " rushlet " to 315 appeared to be in response to the
upcoming meeting on May,3rd,and was beaten back when funds realized
there would be no announcement and the likely-hood of the Dutch
candidate winning.Is Mr.Gould now a market analyst,and if not,where
on God's green earth did he come up with this one?
Dang EDITORS would be wise to leave the analysis to the
analysts,and try objective reporting quoting any analysts by name
when referring to market direction or conditions.IMNSVHO.I think I
should send him an E-Mail and ask exactly where and from whom this
statement was made,or if in fact it was just his opinion.Also,the
statement regarding when the announcement will be made is certainly
questionable.NO ONE knows exactly when this will be announced.Sheesh!
Oh well,at least we know the difference...I think.Duh.<g>
Back tomorrow maybe.Off to see the lizard!
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Bullish about bullion? Read this
Saturday, May 23, 1998
By Douglas Goold
YOU'VE really got to ask yourself how gold bugs can keep the faith year after
year, particularly after a year as disastrous as 1997. As Gold Fields Mineral
Service Ltd.'s just published Gold 1998 reminds us, last year's average price of
$331 (U.S.) an ounce was the lowest in 18 years, and the worst in 26 years if
inflation is taken into account. The 14.6-per-cent fall in the price was the greatest
since 1984.
Last December's nadir of $283, which is just below the 1985 low of $284.25,
looks even more pitiful when you convert that 13-year price to its current dollar
level of $424.
Had enough? There's more, much more. Look at the gold price chart going back
to the beginning of the 1970s, when then-president Richard Nixon allowed the
price to float. If you bought gold any time after 1980, when inflation and interest
rates peaked, chances are you lost money. The explanation is clear from the
inflation chart, which shows the close relationship between inflation and the
inflation-adjusted gold price (it also shows why investors have bought gold as a
hedge against inflation).
If all this isn't enough to make you despondent, look at the final chart, which
illustrates how your brilliant gold investment has performed compared with the
U.S. stock market.
But gold is still an important commodity, particularly to Canadian investors.
Gold stocks have traditionally made up about 10 per cent of the weighting of the
TSE 300 index, though that weighting has been sliced in half to 5.1 per cent.
According to Gold Fields' publication, the Bible of the industry, Canada remains
the world's fourth-largest producer, after South Africa, the United States and
Australia. Barrick Gold Corp. has fallen to the fourth-largest producer in the
world from second, while Placer Dome Inc. has moved up to fifth place from
sixth, behind leaders Anglogold and Newmont.
Gold Fields has always been cautious about offering opinions. But even it picks
up on 1997's "disinvestment" of 260 tonnes by North American and European
investors to suggest that attitudes toward gold have changed -- for the worse:
"The reasons include a more positive outlook on the economy (that is, the
expectation of continued growth with low inflation) and a negative view of the
gold market's fundamentals (above all, the probability of further official sector
gold sales)."
A reading of Gold 1998 leaves one with the sense that unless there is a runup in
inflation or a weakening in the U.S. dollar, the currency in which gold is bought
and sold, the price of gold (currently $300) isn't likely to improve significantly.
The authors admit that "in the absence of a serious inflationary threat, the gold
price is unlikely to rally very strongly, even if last year it was rather oversold on
the basis of somewhat exaggerated concerns as to the future level of central bank
sales."
Indeed, the publication almost confesses to catering to a marginal audience.
"With the withdrawal of mainstream investors over recent years," it concludes,
"the buy-side of the market has been increasingly left to the so-called 'gold bugs'
and others with a traditional attachment to gold." Those others, including Indians,
Pakistanis and ethnic Chinese living in the West, were aggressive buyers of gold
when the price dipped below $300.
Those keen on gold can take solace in the fact that with prices so low, the
industry will consolidate, with strong players such as Barrick becoming even
stronger as weaker companies capitulate.
The key question now is how much gold the European central bank will decide to
hold. The market has already discounted a 10- to 20-per-cent reserve holding. A
higher level is possible, because the most powerful member-states hold a lot of
gold, with Germany coming in at 28 per cent and France at 47 per cent. A
meeting of the governing council is scheduled for June 2 but a decision is not
likely to come until July.
Douglas Goold is Editor of Report on Business. |
