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Gold/Mining/Energy : Gold Price Monitor

GDXJ 109.23

+3.7%

Nov 28 4:00 PM EST

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To: long-gone who wrote (33601)	5/10/1999 10:46:00 PM
From: PaulM	Read Replies (3) of 116790

The gold carry trade may explain why CB's are acting like $295 p ounce is the point at which the sky falls. If I sold gold short (borrowing at 1%), leverage the sale proceeds (perhaps to an extreme) and use this leverage to buy U.S Treasuries (at 5%), then I'm beginning to feel the heat. Specifically, the bonds I bought (at the earlier lower interest rate) are beginning to show losses. Just as in the case of the LTCM/Russian debacle, even small gold price increase would imply a double wammy: losing on my (long) bond position and my (short) gold position. That might cause me a margin call, resulting in my unwinding my positions, and possibly starting a chain reaction of global unwinding. And we can't have that happen, can we. Especially since, unlike the yen carry trade, there is no BOJ to cover my short position with lots of newly printed gold.

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