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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (68295)	9/27/1999 4:29:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Henry, >>there is no massive short position created by the CB's gold leasing. The leases are for term and will be repaid at maturity with the proceeds of mine production. For the record I've been involved with gold leases professionally for close to two decades.<< It's my understanding that much of the gold that is lent by CBs is sold by the borrowers for use in jewelry making, art work, etc... The proceeds of the sales are then invested in higher yielding securities. The borrower in effect is earning an interest rate spread plus or minus the movement in the price of gold. For several years it has been all plus! Considering that it's possible that large amounts of the lent gold is no longer available to pay back loans, and mines can't just turn production on and off like a light switch, couldn't these gold loans act much like a short position and produce a mad scramble for physical gold if its price starts moving against the speculators that have borrowed it and sold it to finance other investments. Wayne

To: Henry Volquardsen who wrote (68295)	9/27/1999 4:52:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 132070

Henry, i will defer to your professional judgement then...the fact remains, the gold that's been leased has been sold and as you say the leases will be paid back with gold that's still in the ground. in the meantime, lease rates have shot up quite a bit, lessening the lure of forward sales and today's ECB announcement has lifted a cloud of uncertainty that has been hanging over the gold market. i am now assuming that the favorable supply/demand characteristics of the gold market will come to the fore, since central bank selling and leasing has been the main factor pressuring the price of gold in spite of same. the hedging by producers was imo just in reaction to the CB factor - the incentive for producers to short has been removed as well and significantly it was mainly producers bidding at the last BoE auction. a few weeks ago when gold was hovering just above it's recent 20-year lows it was officially declared 'dead' on CNBC Europe...<G> anyway, if today's move was a dead cat bounce, it was a hell of a dead cat bounce. one question: if the leases are to be repaid with future mine production, in what way does e.g. a hedge fund that's borrowing gold acquire a claim on said production? do they enter into agreements with the producers? regards, hb

To: Henry Volquardsen who wrote (68295)	9/28/1999 8:03:00 AM
From: long-gone	Read Replies (1) \| Respond to of 132070

<<there is no massive short position created by the CB's gold leasing. The leases are for term and will be repaid at maturity with the proceeds of mine production. For the record I've been involved with gold leases professionally for close to two decades. >> Henry, Is this true if the leased gold went to a non-mining operation(ie bank or hedge fund)ie naked short? Many say naked short position is (perhaps) thousands of tonnes held by speculators - large & small(some in governmental(& quasi) operations(IMF).