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.

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

To: Ken Benes who wrote (74198)	7/30/2001 5:52:36 PM
From: russwinter	Read Replies (4) \| Respond to of 116815

I'd say it mostly derivatives at this point. Supply is decelerating. To cite a few examples, ABX produced 958K in the second quarter. They used this gold to effectively deliver into previously sold contracts and reduce year 2001 by one million oz, and 2002 by 100K. Then they sold 500K mostly in out years 2005-07+. So net net only 458K of ABX's 958K quarterly production were actual new sales. The rest were delivery obligations for the old sales, and were not rolled over into fresh sales. NDY produced 635K in the quarter, but only rolled over 489K (includes TVX NDY and Mt. Leyshon)of this into new hedge sales. The other noticeable aspect in looking over the latest hedge book numbers is the steady decline in the prices of the remaining book. For example as ABX delivered nearly a million ounces of gold into the $340 average priced 2001's, they had to go all the way out to 2005-07 to partially mask the impact. It's simple attrition math, because when I look at my weekend Barrons I see June 2005 futures offered at $302.60. That's why the average price of ABX's 2005 book fell from 348 to 340 in the last quarter. If they were to add 300K June 05's at that 302 forward price (to the 1.2 million '05 on the book at the end of quarter), then the average price would drop to $332, and so on. They need to go further and further out to hide the price erosion, and when you do that you expose yourself to more and more delta factor risk. At current POG and contangos, it won't take long to chew up these hedger heroin fixes for good. And in the meantime they need to worry about reserves as well. Message 16044654