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

To: goldsheet who wrote (68163)	4/24/2001 9:24:53 AM
From: russwinter	Read Replies (1) \| Respond to of 116933

Very little incentive to hedge right now. With one year lease rates at 2.08%, the forward premium or contango is a mere 2.28%. In fact there is building incentive to buy gold instead (as investment) given that the cost to leverage the transaction is now extremely attractive. Clearly the producer hedging aspect of the supply picture has been diminished. That leaves two suspects left to explain the continued weakness. The first is use demand and although bulls would hope for it to be a bit firmer, I don't see this as the principal culprit. That pretty much leaves the shorts and carry trades, and they are under pressure now as the bond instruments they favor trade sloppy. As the yield curve steepens (necessary to recapitalize impending bank credit losses) this will punish the carry trade even more and in turn benefit gold. Of course the other shoe is the US Dollar and I think especially against the Aussie (producers there are especially aggressive currency speculators, it's like heroin for them). Aussie is acting better of late. The key technical variables I'm watching are: Forward rates in gold (contango): Very bullish Lease rates to speculators: Bullish US Dollar, keying on the speculative targets of the carry trade, the Aussie and Yen: Has been bearish, seems to be going neutral Implied volatility of gold (black box equation in hedging activities): Neutral, but can change in a flash The trend of POG as strength will feed on itself (one reason not to be too quick selling the initial rally as gold investors have been conditioned. Remember the "buy the dip" stock market mantra. Finally caught those participants with their pants down): short term neutral One, two, and five year treasury, and agency yields: Starting to look bullish for gold COT for clues on player positioning: Currently bullish