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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Ken Benes who wrote (57807)	9/1/2000 6:01:16 PM
From: Enigma	Read Replies (1) \| Respond to of 117012

And why do you think that is? Have you ever done any sort of banking or business transaction in your life? The paranoia you display here is remarkable. Try visiting a gold producer and finding out something about all the issues, their complexities, etc. If you borrow money you usually have to put up some collateral - but you lump all lenders into some sort of evil conniving conspiracy.

To: Ken Benes who wrote (57807)	9/1/2000 7:13:36 PM
From: The Vet	Read Replies (1) \| Respond to of 117012

Ken, hedging, forward selling and almost all derivative trading can be classified as "future selling". It tends to dampen fluctuations and prolong trends past what the fundamentals should allow if normal supply and demand factors were in operation. It is best explained by the concepts of negative feedback and momentum. If you think about it this is obvious. In practice the major influence on the future price of all future sales is the current price and current price trend of the commodity in question. Look back to oil.. In hindsight it is obvious now that the excessively low prices of a couple of years back influenced the future contracts and prolonged the low prices way past the point that those prices could be justified. The resultant lack of investment due unrealistic future contract prices led to the present situation with oil prices. Now the situation has reversed and the trend is up. It is most likely that the futures trading will prolong the high prices for much longer than can be fundamentally justified. The situation is actually much worse with gold. In any commodity or currency where the volume of future trading of the "virtual" commodity exceeds the volume of the trading of the "real" commodity this effect is amplified. I know that the traditional claims made for futures trading is that it "smooths out" price fluctuations. That is true where the volume of the real product traded is in some balance with the "virtual product" being traded. It provides negative feedback into the trading loop. However if the volume of the "virtual product" greatly exceeds the "real product" then the negative feedback effect is amplified to such a degree that the real supply and demand effects are swamped by the "virtual" supply and demand. This negative feed back feeds upon itself so that lower spot prices lead to even lower futures prices and the real supply and demand price is swamped by the volume of the virtual transactions. Do not confuse the normal contango of futures prices of futures contracts with "higher" real product prices. The contango represents the costs of finance, insurance (or risk), storage etc. and is not translated into a higher future price in practice. Most futures contracts for gold can be roughly calculated by taking the present spot price and adding a fixed percentage for each month out of the contract. If you accept the theory I have offered above you should be able to see that actions by producers to affect the supply of gold is unlikely to make any difference to the gold price until some major event occurs which breaks the negative feedback loop of the derivatives market.