To: nickel61 who wrote (1634 ) 12/19/1999 3:54:00 PM From: nickel61 Read Replies (1) | Respond to
Continuation of prior post.The total amount of gold that has been borrowed from Central Banks and sold into the spot price through the process of creating a hedge or short sale is between 5000 tonnes and 10,000 tonnes depending on who you believe. That means in the last four years a total of between 2 and 4 years of extra gold has been brought to market and used to depress the gold price. This manipulation was extrordinarily profitable for the shorts because they could borrow the gold at 1% interest and sell it into the market take the proceeds and buy bonds yielding 6% and make 5% each year they did it.Through the use of leverage they could get this 5% on 1 million dollar transaction by only putting up $25,000 of collateral.Lets see 5%of $1,000,000 is $50,000 net per year on a total investment of $25,000 deposit for additional collateral. of course the bank you bought the bonds through will hold them till you settle or close the transaction,but so what. Now if you can get your friends to do this as well so that the price of gold actually goes down so that the price of gold declines by 35% from say $395 to $256/ounce then in addition to the $50,000 per year you make you also make a capital gain of 35% of $1,000,000 or $350,000. All on your $25,000 investment. Pretty good return wouldn't you say.This gold carry trade as it is called has been used to bury the gold price and the unwitting shareholders of the mining companies. It has been allowed to continue by the powers who should be regulating this type of illegal activity because it was in their interest to have the commodity prices muffled to allow the asset balloon to continue to debunk every naive investor in America. So what is wrong with hedging? It has artificially lowered the price of gold by about 1/3 and wiped out millions of investors net worth and closed mines and put thousands of miners out of work. Why to enrich the in the know few who are working it to their advantage. It could not have been done without the full cooperation of the politicians and the Central Bankers who lent 10,000 tonnes of their total 28,000 tonnes of holdings. This portion of their reserves have already been sold in order to further the investment scheme described above.Now the reality is they have realized that the game was too good and to many joined the party.Now they know that the gold can't be paid back.So the price must go very much higher so that the incentive to open new mines will be great enough to produce enough more than the 2550 tonnes annual production currently existing and more than the 4500 tonnes needed to fill existing annual fabrication demand. And on top of that enough to produce sufficient gold to pay back the gold that was borrowed and sold and used over the last 4 years and now must come from somewhere to be repaid to the lenders who still claim it on their books as an asset. That's right the Central Banks still show that gold recievable as being there even though it was long ago sold at spot melted and is now hanging from someone's wifes ear. That is as clear as I can get in explaining the hedging lie. Thank you for listening.
