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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (7607)	9/2/1999 7:07:00 PM
From: russet	Read Replies (1) \| Respond to of 81256

Hi DD, As the POG fell (1988-1998), caused by the supply of gold from all sources exceeding demand, demand would increase because gold has become cheaper to buy. My understanding is that the price of gold in many gold consuming countries was actually increasing during this time, as the U.S.$ rose relative to these currencies. I'm sure that would work to depress the consumption of gold in those countries further depressing demand. Kind of a triple whammy on the POG as gold producers were also trying to lock in higher gold prices in a depressed market by leasing gold to play cantango, thus pouring more supply on the market,... and other speculators leased the gold (more supply) to make cantango. Some time in the future (we all hope), the demand for gold will once again exceed the supply. Producers will slow down or stop leasing gold to hedge the price, speculators will fail to make money if they continue to lease gold so they will stop, and POG will start to rise. Of course, as the POG rises, demand will drop until some equilibrium occurs again where supply = demand at a new, higher POG. If the U.S. dollar starts dropping, the POG to Americans could increase, lowering demand from that country. Other countries may see a POG drop in their currencies which could increase demand from them. Complicates the picture somewhat, doesn't it. As there remain many independent suppliers of gold who compete with one another to supply the gold to the buyers, and the product is a commodity metal, one would suspect that the cost to mine and refine the gold would have more to do with determining the POG, than anything else,...at least that is what economic theory would tell us. As long as supply and demand are roughly in line, that's where to look to determine the price. If some exogenous event were to occur like more CB selling increasing supply, or a new buyer coming from somewhere like my aliens wanting to buy gold thus increasing demand,...a new price would be found through market forces. I got sidetracked. What I wanted to say was, the average demand for gold must have been lower than the average supply over the last decade, or the price would not have dropped, from its now lofty looking, $US400+ levels.