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

To: Freedom Fighter who wrote (68299)	9/27/1999 6:27:00 PM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 132070

Hi Wayne, the scenario you outline has the assumption that the gold is ultimately leased to speculators. Some is but the larger share is leased to producers who are hedging future production. Most lending to producers is done on a secured basis so the lenders who are intermediating these deals are pretty careful to make sure the gold is there. 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. anything is possible of course. however I feel this is a pretty remote possibility. First as I said much of the leased gold is lent to producers who will repay out of production, they are not speculating. Second there is plenty of unleased gold available. If a physical shortage of gold developed leases could be rolled over till production came on line or lease rates would increase sufficiently to draw more gold into the leasing market. But the my basic difference with your scenario is that I believe most of the gold is leased to hedgers, not speculators. Henry