Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Les H who wrote (69923)	11/2/1999 12:39:00 PM
From: MythMan	Respond to of 132070

Nah, RealMan is the urban legend -g- Rate hikes are more akin to a joke.

To: Les H who wrote (69923)	11/2/1999 6:09:00 PM
From: Les H	Read Replies (2) \| Respond to of 132070

The lending gap that brought grief to gold [London Evening Standard, Nov 2] by ANTHONY HILTON City Editor The turmoil in the gold market is a classic City row. Nothing is visible on top but the most furious and bitter dispute rages just below the surface. Occasionally it becomes more visible, as when yesterday three European gold producers wrote to the Financial Times demanding a statement from the Bank of England on its attitude to gold and the gold market. The Bank typically had nothing in detail to say but it nevertheless is just the latest sign that producers of the yellow metal have become seriously fed up with those who prefer simply to deal in it. It does appear that the degree of speculation in the gold futures markets had reached quite astonishing levels. The dealing report of the London bullion market for September, for example, says: 'The average net daily clearing turnover in London rose by 2% in September to 37.1 million ounces (1154 tonnes), the highest level this year.' In isolation that figure may not mean much, but when you remember that annual new mine production of gold is about 2500 tonnes a year, it means that total production of all the world's mines is sufficient to keep the market supplied for only about two and a half days (yes, days) of trading in the whole year. Alchemists tried to turn base metal into gold. Modern-day rocket scientists seem to have turned it back into paper, or perhaps just an electronic blip on a screen. But by any measure this is a vast amount of derivatives trading to be supported on such a small physical base. Perhaps to get more supply, but more likely just to turn a profit, most of the world's gold producers have been bounced by the financial community into selling their gold production forward, many on a quite heroic scale - not just Ashanti, which is now in trouble, but right across the industry. The counterparties to these deals are financial institutions - some like Chase, which has doubled its position in the gold derivatives market in the past 18 months, some like Goldman Sachs, and some like Long-Term Capital, the hedge fund we were led to believe has been looking for safe investments since its debacle last year in Russia. What caused the turmoil in the market, therefore, was not the decision by the central banks a few weeks ago to stop selling gold. Rather it was their decision to stop lending gold that caused the huge rise in price and, of course, has left a large number of those short of the metal with no mechanism to deliver on their commitments. It is also increasingly clear that this problem is not going to go away and runs a lot deeper than any of the authorities are prepared to admit in public. These shenanigans have devastated the gold producers. There are also several financial institutions rapidly coming to wish they had never heard of the metal... found at :http://www.users.dircon.co.uk/~netking/finan.htm#t_hotpot originally was at the newspaper site but got pulled