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To: goldsnow who wrote (43231)	10/17/1999 11:27:00 PM
From: Alex	Read Replies (2) \| Respond to of 116759

Gold giants gather as investors hedge their bets By Paul Simao DENVER, Oct 17 (Reuters) - The controversial issue of hedging will take center stage as the world's largest gold companies gather in Denver this week to ponder the health of the volatile gold market. Hedging, a practice that allows firms to guard against a fall in commodity prices by selling future production at a fixed price, looked like a nifty idea for much of the last two years as gold snapped through a series of multi-year lows. But for the past month, it has been the kiss of death. Panicked by the recent surge in gold prices and the prospect that some companies could be forced to sell the precious metal below market prices, nervous investors have unloaded the shares of hedged producers with a vengeance. Ashanti Goldfields Co Ltd. , Africa's third-largest producer, was among the first to feel the heat after it revealed two weeks ago that a complex derivatives-based hedging program had put it on the wrong side of the gold rally. The company's stock plunged by about 50 percent as the scale of the bad bet -- some analysts have estimated hundreds of million of dollars in paper losses -- prompted a wave of margin calls from gold hedging counterparties. The Ghanian producer, which is now mulling over a takeover bid from British miner Lonmin Plc (quote from Yahoo! UK & Ireland: LMI.L), closed at $4-5/8 a share on Friday on the New York Stock Exchange. Cambior Inc. (Toronto:CBJ.TO - news), a mid-sized Canadian producer, also suffered the wrath of skittish investors when it disclosed earlier this month that it had hedged a significant portion of its future production at an average price of $318 an ounce. The disclosure occurred in the middle of a stunning rally that pushed the price of gold up $50 to near $325 an ounce. The precious metal traded at $314.40 an ounce on Friday. ``There is a cost to everything. The gold producers thought they were hedged on the downside. What they have found is those hedges don't work on the upside,' said John Ing, president of Canadian brokerage Maison Placements Canada Inc. in Toronto. ``Our estimate is that a great many producers are out of whack (on their hedging positions).' The pressure on gold producers to unveil the size of their hedge positions could become unbearable in the months ahead if bullion shows signs of sustaining its rally. Gold, which plummeted to a 20-year low of $251.70 an ounce in August amid concern about British bullion sales, bounced back late last month after 15 European central banks pledged to cap future gold sales. Central bank sales, along with a strong U.S. dollar and weak worldwide demand for metals, were one of the key factors in a devastating downward draft that engulfed the thinly traded gold market beginning in 1997. With the black cloud of central bank sales having passed from the horizon and the lease rates at which banks lend gold having risen, the giants of the industry have been driven to reassure nervous investors. In some cases, however, hedge positions have been quickly closed out. South Africa's Gold Fields Ltd. , the world's second largest producer, took the lead last week when it announced it had closed out a large chunk of the 1.8 million ounces of gold it had hedged through a mix of forward sales and call options. ``Having looked at the fundamentals of the current gold market and the implications of the Ashanti situation, it seems inevitable to us that higher, if not much higher, gold prices are possible,' Gold Fields Chief Executive Chris Thompson said in a press release. Analysts, however, advised investors searching for bargains in the gold sector not to shy away from solid, blue-chip miners merely because of their exposure to hedging. ``There is a greater-than-should-be perceived notion that all hedge books are potential issues right now. They're not in my view.' said Daniel McConvey, analyst with U.S. brokerage Goldman Sachs in New York. ``The average amount of production that North American companies have hedged is probably less than two years. I think the market here can deal with that and the counterparties can deal with that,' McConvey added. Canadian-based Barrick Gold Corp. (Toronto:ABX.TO - news), often credited with maintaining the most prestigious hedging program in the gold sector, is one company that does not appear to have been spooked by the controversy. Barrick, North America's largest gold producer after Newmont Mining Corp. (NYSE:NEM - news), has dismissed suggestions that its hedge book of 13 million ounces could lead to a liquidity crisis similar to that haunting other producers. Barrick insisted last week that a strong balance sheet and solid A credit rating had allowed it to build a hedge book that protected shareholders from falls in the gold price while exposing them to the benefits of a price surge. The company said it had locked in low gold lease rates near 2 percent on its hedge book and that it continued to hold a unilateral option to defer forward sales contracts by up to 15 years if the price of gold continued to rise. Denver-based Newmont does not have a significant hedging program. biz.yahoo.com

To: goldsnow who wrote (43231)	10/18/1999 12:58:00 AM
From: PaulM	Respond to of 116759

Armstrong Points Finger at Republic National Bank telegraph.co.uk

To: goldsnow who wrote (43231)	10/18/1999 1:18:00 AM
From: Tunica Albuginea	Respond to of 116759

goldsnow: Economist Kaufman:Recession in 12-18 months: cbs.marketwatch.com news/current/loeb.htx?dist=hdlnbug&source=blq/yhoo Economist puts date on recession Kaufman projects next big drop in 12 to 18 months By Marshall Loeb, CBS MarketWatch Last Update: 7:13 AM ET Oct 16, 1999 Personal Finance News Marshall Loeb Library NEW YORK (CBS.MW) -- For the first time, a major U.S. economist with an excellent record of prediction is forecasting an economic recession -- and putting a date on when it will start. "The next recession will begin in 12 to 18 months." So says Henry Kaufman, head of the influential international economic consulting firm that bears his name. Attention has long been paid to Dr. Kaufman, notably since the time he was the chief economist and an executive committee member of Salomon Brothers and he predicted, early on August 17, 1982, that interest rates had reached their peaks after six years of a rising trend. Later the same day the Dow Jones Industrial Average surged 39 points, or 4.9 percent -- its biggest jump in history till then -- and set off on the 17-year bull market that still continues. CBS MarketWatch columnist Marshall Loeb interviewed Kaufman for an hour in his chrome-and-teak headquarters in mid-Manhattan. CBS.MW: When will the next recession begin? Kaufman: In 12 to 18 months. CBS.MW: Really that soon? Kaufman: Yes, but I would put it toward the latter part of that period rather than the beginning. Don't forget that by next February we will have achieved the longest period of economic advance in the history of the U.S.--107 months. There's an expectation of euphoria now, but nothing lasts forever. A lot of the timing of when the recession will begin depends on the performance of the stock market. I know of no period in history when the American economy and the economic welfare of the rest of the world hinged so much on the U.S. stock market. CBS.MW: How do you define recession? Kaufman: Two or more quarters of decline in economic growth. CBS.MW: What will be some of the consequences? Kaufman: Once the economy shows signs of faltering, the U.S. government bond market will rally very sharply. When the next recession really hits, long government bonds, whose interest rate is now 6.26 percent, will be down to 4 percent. CBS.MW:Wow! That suggests that the prices of 30-year Treasury bonds will soar? Kaufman:Yes. And recessions are not the end of the world. The U.S. has a resilient economy. We're in better shape to recover from recession than we were earlier in the 1990s, at least in a fiscal sense. The federal budget is in surplus and the government, if needs be, could cut taxes and loosen money to energize the economy. CBS.MW: How do you expect the economy will perform in the months before the recession hits? Kaufman: The third quarter of 1999 was very strong. The fourth quarter looks quite good. Everybody will forgive any aberrations in the first quarter of 2000 because of some bumps due to Y2K. So it may be the second quarter before a reassessment begins. CBS.MW:What do you foresee for interest rates? Kaufman: At its meeting on November 16, the Federal Reserve's Open Market Committee probably will raise the federal funds rate by 25 basis points. But that would not be a major move. Thereafter, I expect the Fed will step aside for the time being because of the Y2K issue coming up in December and the potential for computer problems here and abroad that may cause glitches. That's a difficult time to enforce a stricter monetary policy. I don't expect the Fed to do much. CBS.MW:What do you recommend for fiscal policy--taxes and spending and budgets? Kaufman: We will continue to generate a good budget surplus. The surplus has been exceedingly beneficial to the stock market. When the government pays off its borrowing, it's the investor who gets the cash, which then goes into new investments. That's why I oppose measures now to reduce taxes and increase government spending. Let's save those measures for when the U.S. economy is faltering. CBS.MW: What else do you see ahead for the stock market? Kaufman: We can't go on generating these double-digit corporate profit increases every year. Initially there will be a slowing of the rate of profit growth; then an actual downturn in earnings would not be that far away. The stock market also has been driven by huge buybacks of stock by American corporations. If stock prices decline, these buybacks will diminish. CBS.MW:What other problems do you envision? Kaufman: We are encouraging huge balance of payments deficits -- $300 billion annually. Each year our payments deficit gets bigger. That, too, won't go on forever. Indeed, the huge deficits will start to come to an end when Europe and Japan show improved economic performance and they start importing somewhat more from the U.S. When this happens, the Europeans and the Japanese will increase their demand for credit, but their central banks will not have to pursue the same monetary ease as they do now. These factors will slow down the flow of money to the U.S. from abroad and may challenge the U.S. stock market. CBS.MW: When will that occur? A. There are signs that economic performance in Europe is improving. The latest signs out of Germany, which had been a laggard, show improvement; exports are up. Even in Japan there is the beginning of modest revival. CBS.MW:Won't this lead to a rise in inflationary pressures in the U.S.? A. The U.S. has been benefiting from the sluggish economic performance of Japan, Europe and the rest of the world. This has been holding down the U.S. rate of inflation because countries abroad have excess capacity and are pushing to export. Over the next couple of years we'll be confronted with an improving Europe and an improving Japan. That will force us to make a financial adjustment--unfortunately in the form of higher interest rates. This, too, may challenge the American stock market.