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

To: Claude Cormier who wrote (38948)	8/13/1999 10:00:00 AM
From: john mcknight	Read Replies (1) \| Respond to of 116895

City: Speculators put glitter back into gold Source: The Daily Telegraph London THE gold price jumped by $2 to $260.75 yesterday - its highest level for more than a month - amid rumours of heavy buying by hedge funds and other international speculators. London-based dealers believe speculators are being forced to buy gold following a sharp rise in recent weeks in lease rates - the rates charged by bullion houses for lending gold. Lease rates have risen from 1 1/2 pc to 4 1/4 pc over the past two weeks, creating problems for investors in the gold carry trade - a trade which involves borrowing gold, selling it for cash, investing the proceeds in the money market and collecting an "uplift" of around 3 1/2 pc. The rising cost of borrowing has led to a sharp decline in the value of the "uplift", leaving many speculators either earning tiny profits or else facing outright losses. As a result, many have decided to buy back the gold they owe rather than roll over their positions. Financial experts see disturbing parallels between the gold carry trade and the yen carry trade which collapsed a year ago, with disastrous consequences for many hedge funds, including [Long- Term Capital Managemen]t. The gold carry trade has led to a huge increase in the number of "short" contracts taken out by speculators. As they struggle to liquidate them, they are having to buy gold in the market, pushing the price up against themselves. The gold price has recovered substantially from the "low" of $253.95 touched at the end of July. Yesterday's upward movement took it back to its highest level since July 6, the day of the first auction of British gold. The Bank of England achieved a price of $261.20 before worries about the huge overhang of British gold sent the price crashing. Gold was priced at $287.95 just before Chancellor Gordon Brown's controversial announcement on May 7 of plans to sell off 415 tonnes - or more than half the reserves. Despite a chorus of criticism and the damaging impact of the first gold auction, the Chancellor has refused to reconsider. The Bank is due to sell off another 25 tonnes on September 21. (Copyright 1999 (c) The Telegraph plc, London)