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

To: d:oug who wrote (39872)	9/2/1999 4:22:00 AM
From: Ron Everest	Read Replies (3) \| Respond to of 116931

Hello DougAK, I think that the forward selling of gold does hurt the price of gold and undermines the commodity and industry. I am not against forward selling by the producers as it is a business decision where they use their credit standing to stabilize their future prices. Because some, as in ABX, have rights to defer, fixed lease rates and likely other flexible terms, some people think that ABX and its counterparts will never return the gold sold forward in their contractual deals. Also, many think that the contango will break a company like ABX, but IMO they do not have all of the facts. Some think that the price of Gold when in a sharp rise will cause the companies to have lower revenue then they currently have? Wrong, they simply have lost opportunity to make even more. ABX has very low production costs which should continue low and they will ramp up additional production in the event of a price rise. The idea that this is a business decision of merit is sound IMO. In my past life we used derivatives to trade risks one company to another. The idea was that there is a cost to stabilize one's margin. In the Gold industry and particularly ABX it has been a large benefit to have the "premium hedging program" as profits remain high and will continue high. In my view if gold prices ramp up, ABX and others with sufficient resources and particularly high credit standings will again sell forward as much as they can handle from the credit perspective. The idea that a company which is hedged and making oodles of profits is going to take over other companies weakened by their lack of foresight, or, lack of credit standing is IMO true. The opportunity is certainly there and will become greater as time passes at US$250 + gold. If the price remains low for 3 to 4 years then it will be forced to rise through production being withdrawn through bankruptcies, shut in reserves and so on. Demand appears to be outstripping supply but supply is coming into the market regardless, possibly from sovereign sales that aren't being made public. I am not sure how the "paper Gold certificates" will be played out. Seems that a huge amount of gold is being sold in this form with storage fees attached no less. If something causes people to demand physical gold for the paper promises then watch the price of gold rise dramatically. Have to say, there are a lot of sides to this AU fence.! ;>)