Thanks John. Very interesting. In my view, however, whatever the producers do, they're cornered. If they sell or sell forward they drop the gold price in their own faces. If they withhold sales, hoping for a price rise, the short sellers move in and shake them out. And, it will require enormous funding to stockpile hundreds or thousands of tonnes of gold production. And what for? Everyone knows that eventually they HAVE to sell. So, it becomes a game of double bluff with the short-sellers.
Same situation prevailed with deBeers, who sat/sit on hundreds of millions of dollars worth of diamonds while attempting to push up the price. Along came a whole lot of "independents" and they simply undercut DeBeers. In the old days, Debeers might have been tempted to use a little violence to get the other producers in line. Today, that's impossible. Russia, Angola (Unita) and also Australia are "uncontrollable". Now, DeBeers have lost control of the rough diamond market and 40% of sales. And, they still sit on an enormous stockpile --- which they have to fund out of their own pocket.
Another difficulty the producers have is with their mindset --- or is it the mindset of the market? Are they producing a high volume, low price commodity, like Coca Cola, or a low volume, high price substance --- like a work of art? Unfortunately, what they are trying to do is to pretend that gold is something precious, and advertise it in that way, and then attempt to flog the hell out of the market in every conceivable way, especially via low cost jewellery. Either something is precious, and rare, or it isn't. Today, regrettably, gold is neither. |
