I do not think one want to stay short much longer..Check this out..
Gold rates stay high as opinion split on LTCM
12:29 p.m. Sep 28, 1998 Eastern
By Patrick Chalmers
LONDON, Sept 28 (Reuters) - Sharply higher gold lease rates split bullion market opinion on Monday, with analysts and dealers at odds on the cause of rising metal borrowing costs.
Implied gold lease rates remained high, with London Bullion Market Association figures for one-month metal at 1.51 percent, down from Friday's 1.70 percent but still well up on Thursday's 0.65.
Andy Smith, principal commodity analyst at Mitsui & Co in London, said the rise was more due to a knee-jerk market reaction to Friday's bailout of U.S. hedge fund Long-Term Capital Management (LTCM) than lower metal supplies available for loan.
''The short answer is that the market has been very efficient and typically nervous, raising borrowing rates first and asking questions later,'' he told Reuters.
Friday's four-month high in spot gold prices came after lease rates jumped, a rise dealers and analysts put down to a combination of factors linked to the LTCM bailout.
Hedge funds have regularly been short gold during recent months, borrowing metal to sell in anticipation of buying it back later at a lower price.
Dealers said the near-failure at LTCM turned the spotlight on other funds, boosting spot gold prices on the back of real or anticipated short-covering.
Funds like miners, use the gold lease market to borrow metal for their derivative transactions, with the lease rate a measure of how much metal is around.
Smith discounted the idea that a huge weight of short positions remained to be covered, citing U.S. data showing collective net short positions on New York's COMEX gold futures market as having shrunk by the equivalent of 208 tonnes since the start of September.
Others said central banks had withdrawn metal for loan and commercial banks had hiked rates.
''After the Long Term Credit Management rescue they (central banks) are uneasy about the exposure of hedge funds short of gold and under increased pressure to close out positions,'' said Nick Moore of Flemings Global Mining Group in a report.
Rhona O'Connell, metals analyst for brokers T.Hoare and Co., said another factor was that bullion banks had also taken in more metal in anticipation of having to execute producer sales orders if gold hit $300 an ounce.
Whatever the cause of higher lease rates, spot gold had calmed come late Monday business in Europe, drifting to be last at $292.40/$292.90 a troy ounce versus New York's Friday close of $293.80/$294.30 and its session peak just below $300.00.
Copyright 1998 Reuters Limited. |
