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

To: Alex who wrote (36855)	7/8/1999 6:05:00 PM
From: hunchback	Read Replies (1) \| Respond to of 116780

Daily Economic Commentary-US-Wednesday, July 7, 1999 Two Commodity Indexes Diverged - Which One Will You "Take"? As the chart below shows, we now have a significant divergence between the paths being taken by the Journal of Commerce (JOC) index of industrial commodities prices and the Commodity Research Bureau (CRB) index of commodity futures prices. The JOC index in recent days has reached its highest levels since early October of last year. In contrast, the CRB futures index currently is probing toward its multi-year low set earlier this year. Why the divergence? The JOC does not contain the price of gold, whereas the CRB does. Also, unlike the CRB, the JOC does not contain agricultural commodity prices. On the other hand, the JOC contains some wood products prices, such as plywood. The CRB does not. On Tuesday, the price of gold plummeted about $7 an ounce as the Bank of England auctioned off its first tranche of gold holdings. Other central banks have been more discretely selling off their gold holdings too. Even the IMF has toyed with the sale of some of its gold in order to raise funds to throw good money after bad. Given that inflation globally currently is low, given that real short-term interest rates in every major world money center are positive and given that there is availability of inflation-protected government bonds denominated in a number of major currencies, including the world's reserve currency - Green(span)backs, gold, as a store of value, is dominated by many other assets. In contrast, some of the less shiny metals, such as aluminum and copper, are now skyrocketing in value. Why? In part because of increased demand; in part because of decreased supply. With a global economic recovery underway, the demand for industrial commodities is increasing. At the same time, some suppliers, especially of copper, have made a decision to shut-in some capacity. Even at today's higher prices, it just isn't profitable to produce as much. When the Asian crisis hit and global demand imploded, inventories were unloaded at any price. The costs of production had already been incurred. It was either sell it or store it. But now that the inventories have been pared, the decision to produce more depends on whether it will be profitable to do so. And that depends on price. So, all of this alleged global excess capacity is only excess at a high enough price. As global demand picks up, global prices will start to pick up. Then, at the higher price levels, production of these commodities will also start to pick up. My own view is that the JOC is going to give bond investors a better read on developing price pressures than is the gold-weighted CRB index. Bond traders would do better to follow the red metal than the gold one. Paul Kasriel Chief Domestic Economist ntrs.com ------------------------------------- Seems like gold is moving from Apathy to Depression. : ) hunchback

To: Alex who wrote (36855)	7/8/1999 6:38:00 PM
From: Zardoz	Read Replies (1) \| Respond to of 116780

Been suggesting much the same since the BOJ stood up to the currency window. Round 4 will be on it's way soon. Hutch {wishing he'd kept his shorts on longer then just that one day} My longs got killed today. Someone hates PDG.

To: Alex who wrote (36855)	7/8/1999 9:22:00 PM
From: Tomas	Respond to of 116780

IMF: Doubts on planned gold sale - Financial Times, Friday July 9 By Robert Chote, Economics Editor The International Monetary Fund's executive board will discuss today how best to carry out the planned sale of part of its gold reserves, a decision made all the more awkward by the fall in the gold price which followed the Bank of England's 25 tonne auction this week. The Fund's leading shareholders agreed in Cologne last month that it should sell and reinvest up to 10 per cent of its $26bn gold stockpile to finance debt relief and the extension of its subsidised loan facility for poor countries. The board is expected to discuss how much gold to sell late next month, although hostility in the US Congress is casting doubt on the exercise. Today's discussion will focus on the methods by which any gold sales could be carried out. Board members will have four options: Direct sales "off-market", for example to central banks that are trying to increase the proportion of gold in their reserves; Placement with private sector institutions, which would then sell the gold into the market themselves; Placement with a central bank or the Bank for International Settlements, which would then undertake to sell the gold itself; Staged public auctions, like those being used by the Bank of England to sell 415 tonnes of the UK government's gold reserves over the next few years. When the IMF last sold part of its gold reserves - between 1976 and 1980 - it opted for auctions, but this was at a time when underlying demand in the market was strong. With the gold price already weak, the Bank of England and UK Treasury have been criticised for making things worse by announcing a programme of big gold auctions in advance. Critics of the UK institutions believe they have been vindicated by the fall in the gold price to a 20-year low following the auction. Yesterday the gold price was $257.20 a troy ounce at the London afternoon fixing. But several directors at the Fund believe it should stick with auctions, which have the advantage of being transparent and accountable. The board could ask management to draw up more detailed proposals for a combination of the four methods - perhaps auctions plus direct sales. The discussion will be complicated by concerns of gold mining nations, influential in six or seven of the 24 constituencies which elect or appoint IMF directors.