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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (36667)	7/6/1999 1:37:00 PM
From: paul ross	Respond to of 116753

From USA Gold: MARKET REPORT (7/6/99): In one of the strangest market reactions I have seen in my 26 years in the gold business, gold took a hit today after the Bank of England auction was oversubscribed 5.2 times and Japanese banks refused to buy U.S. Treasuries because of impending potential Y2K problems. Now normally those of us of sound mind and temperament -- possessed of a rational approach to life -- would have been led to believe that two such seminal events would turn the market decidedly higher, but not in this topsy-turvy world of Alice-in-Wonderland finance. Instead we are led to believe that this extraodinary demand for gold is a bearish development destined to drive the gold market lower. The B0E gold went out at $261.20 per ounce -- a price that would not send gold owners running for their safety deposit boxes to make sure their gold is still there; but enough to make most rational individuals think that the auction bidders were somewhat determined to obtain yellow metal. Helen McCaffrey at N.M. Rothschild & Sons (before New York opened) called it a "fairly good result." "The fact that it was 5.2 times oversubscribed," she went on, "indicates that there is appetite at these levels and below." As we are all finding out, Ms. McCaffrey, no one should under-estimate the wherewithal of an institution(s) or fund(s) short the market and fearing for their financial survival ( e.g.,the Nick Lesson Effect). How else do you explain someone shorting the market under these circumstances? It certainly does not have to do with substantial downside when you are bumping against (a) the cost of production in 75% of the world's gold mines; (b) the International Monetary Fund sales likely being stymied in Congress; (c) world wide consumption at record levels; and, last but not least, (d) a lack of mobilizations of gold reserves at the central banks (despite what we are being told by the mainstream media nearly every day). It is totally irrational and irrationality is usually associated with its close cousin -- desperation. I return to an earlier thesis that those shorting this market might not be interested in profiting from the short positions they assume. Instead, they could very well be protecting another aspect of their gold trading book -- the carry trade business. So, the only way to get the price down is to get it down with paper -- through the derivatives' market and that is what happened this morning. And the only sensible reason I can come up with for driving it lower is to acquire physical metal as cheaply as possible. In this way, the BOE is either being played for a dupe by the gold buyers, deliberately destroying the pound, or bailing out some institution for reasons we don't know at this time. It's going to be fun to watch the shorts and the mainstream media try to explain today's gold market action as criticism and the questioning of today's events rises to a crescendo levelon both sides of the Atlantic. The obvious question is: With the auction being over-subsribed by five times, why wouldn't the over-subscription now overflow into the free gold market -- if that's what we can call it -- and initiate a price run-up? We'll watch to see if the buyers don't come in as today's trading session moves forward. If you were short, I should think that you might have some concerns in that regard. If you wanted to buy, I would think that this $6 drop would be an incentive. usagold.com