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

To: long-gone who wrote (69311)	5/16/2001 11:28:47 PM
From: Rarebird	Read Replies (1) \| Respond to of 116791

Gold Stocks Up As Investors Move Out Of Cash, Bonds: Wednesday, May 16, 2001 01:09 PM ET By Hollister H. Hovey Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The Federal Reserve's interest rate cut along with its open door attitude towards further reductions put a nice luster on gold stocks Wednesday. With the 3-month treasury bill yielding 3.57% to 3.65%, real interest rates -- the current short term interest rate minus the inflation rate -- are trending towards zero or negative territory, crimping gains on bond or cash investments, Meridian Gold Inc. (MDG, news, msgs) spokesman Wayne Hubert said. That means investors look to gold, which shines in low or negative real interest rate environments. "If the Fed cuts more, as anticipated, (real interest rates) could reach zero or even negative," John Tumazos, metals analyst at Sanford C. Bernstein said. Whenever real interest rates have inched into negative territory, the TSE Gold Index has tripled, Hubert said. With the TSE Gold Index that high, demand outstrips mine supply, driving up gold prices, he said. That means more money for mining concerns. With gold prices directly hinged to the strength of the dollar, its important to watch other international currencies. "We have seen significant demand for gold which has been consistently higher than supply...over the last 10 years," Igor Levental, vice president, investor relations of Homestake Mining, said. "The recent weakness in the price of gold (in the U.S.) is due to the strength of the U.S. dollar...I would imagine that if there's a weakness in the exchange rate that would be extremely positive." "An interest rate cut would lower returns to investors who hold dollars or dollar bonds," Tumazos said. Both Levental and Bear Stearns managing director Michael Dudas agree that the companies that will most benefit from a weak dollar have leverage to the price of gold. Homestake and Newmont are virtually unhedged to the price of gold, Dudas said, and both are working to cut costs. The gold mining group has been shining for Dudas for awhile, and lower interest rates only improve the picture. "The added liquidity to the market place the central banks are providing should continue to support commodity prices like gold," Dudas said. "With a slowing U.S. economy and higher liquidity has people thinking more...about these companies -- a group that's been relatively ignored. And quietly the shares have performed well year-to-date." -Hollister H. Hovey; Dow Jones Newswires

To: long-gone who wrote (69311)	5/17/2001 11:20:17 AM
From: E. Charters	Respond to of 116791

290

To: long-gone who wrote (69311)	5/17/2001 12:02:13 PM
From: russwinter	Read Replies (1) \| Respond to of 116791

I tend to go with Kaplan on this, as I have felt that the influences of the shorting, carry and hedging game have been the dominant force that drove POG into the 250's. Gold has become a major instrument of banking and finance schemes as much as anything else. The good news is that the fundamentals (finance costs)have shifted in favor of buyers, not just borrowers. That's why the forward futures (returns to hedgers and cost to buyers)and lease rates (cost to borrowers), as does implied volatility (IP, now coming off very low levels 12-15)becomes crucial. I also agree strongly with Kaplan that the dollar against the "gold currencies" like the Aussie is of importance. As long as it continues to look like this, we are fine: kitco.com The perception issue is a tough nut to crack. People like us tend to be "qualitative thinkers", but the masters of the universe who are driving prices are quants and black box types and just crunch impersonal numbers to make decisions. Right now, that's the driver. But hope springs eternal that the momo players (bandwagon effect) may jump into the fray. So far, I'm not sure.

To: long-gone who wrote (69311)	5/20/2001 4:50:36 PM
From: russwinter	Respond to of 116791

Leonard Kaplan on black boxes and quants possibly driving the price spike. He recognizes this aspect, but appears to diminish it's effect as transitory or an unknown? Far from it, derivatives, black boxes and the delta hedge may well be the dominant force in determining POG for some time to come, and probably has been for some time. As implied volatility, POG, and Aussie Dollar against US Dollar move higher, this will push the black box models into a further buy mode, thus fueling higher and higher prices. The whole derivative edifice will face a "nuclear" stress test. And it's not just spec funds that are affected, it's also large producer and bullion dealer positions. Should not be underestimated as a bullish factor. Kaplan: ""To attempt to understand the rally, perhaps it is best to understand that many of the large speculative funds are not managed by the decisions of human beings; the trading decisions are generated by computers. And that most of the computers all read the charts in the same fashion and generate buys and sells at the same price levels. Given the enormous size of orders that such funds can generate, and given the fact that London was closed for the weekend, thereby reducing liquidity in the market, gold prices rocketed as the buy orders catapulted the prices through successive resistance levels, thereby generating more buys. A self-fulfilling prophecy at a time where the liquidity was at its lowest levels, Friday afternoon. Please understand that the above opinion could be simply a rationalization of the events and may be incorrect. Time will tell.""