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Gold/Mining/Energy : Gold Price Monitor

GDXJ 113.22

-0.5%

4:00 PM EST

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To: long-gone who wrote (29782)	3/11/1999 11:42:00 PM
From: PaulM	Read Replies (2) of 116837

FWIW, physical gold looks more appealing than XAU to me. Reflecting on what's been going on the past few years, it occurs to me that Wall Street's managed to turn much of the mining industry into a hedge fund industry. Gold analysts tend to gloss over the possibility that an explosive upside move in gold is not in most miner's interests. Miners have become like much of the financial esablishment--OK with a small move up, or a small move down, but in real trouble should the unexpected arrive. Let's ask ourselves this: if gold went to say, $500/oz--a big move, but not a totally nutty figure by any means--and a miner has to deliver $350 gold for the next three or four years because of hedging, will the miner be able to make good on its obligations? $500 gold--which is likely to occur in a more inflationary (or at least weaker dollar) environment--probably also means the miner's cost per ounce is greater than $350. In that scenario, the miners are not only giving up the gold price increase, but are also possibly putting themselves at the mercy of their (gold) creditors. All this makes me wonder about the prospects (even longer term) of much of the XAU.

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