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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: loantech who wrote (2832)	5/18/2002 10:12:27 AM
From: nickel61	Read Replies (1) \| Respond to of 3558

It is important to understand that they are not really selling above market price...it is the way they account for it. They sell at spot market price, gold they have borrowed from a large holder of gold reserves(generally a central bank that has gold bars sitting in a vault to back up their currency)This gold is then taken from the central bank vault and sold in the spot market. An interesting aside is that the accounting of central bank reserves dictated by the IMF allows the central bank to lend the gold that is then sold in the spot market and made into jewlery or whatever, and the central bank can still keep it on it's financial statement as if the gold bars were still there, just "leased" yes that is correct, they actually do that) Well then the borrowed gold is sold and the cash proceeds are used to buy US treasury notes of a five year maturity. The 5% per year interest that Barrick will recieve on the treasuries is then compounded into the future and added to the origional spot market price they got for selling the borrowed gold and claimed as the "sale" price, today. Yes that is actually what they are doing. In fact the sale price is not anything other than the accounting estimate of how much they will earn on the cash balance for a period of time into the future that they determine. That is the significance of their claims about being able to defer the delivery or closing of the contract up to fifteen years into the future, it allows their accountants to play more games with how long the 5% will be compounded and therefore claim an even higher current "sale price". I know it sounds too unbelievable to conceive of but that is exactly what they are doing. IF more shareholders knew exactly what was going on they would demand much more honesty in the reporting. But Barrick is hiding behind the financial mumbo jumbo and concealing the true nature of the process from the shareholders who are not privy to the nature of exactly what they are doing.

To: loantech who wrote (2832)	5/18/2002 10:24:40 AM
From: nickel61	Read Replies (2) \| Respond to of 3558

Just to clarify what I just said. Barrick sells an ounce of borrowed gold today at $312 and invests in a five year US treasury note yeilding 5% to maturity in May of 2007. That is 5% compounded for five years which allows them to claim a "sale" price of $398/ounce!!!!!!!!! Yes that is as simple as it is...The whole process is bullshit unless you somehow think they are doing something else for you...they aren't it is just they are more aggressive about dressing it up...PERIOD. The plan looked somewhat feasible in a constantly declining market but is absurd in a rising gold market...It is market manipulation (through the selling of additional gold into the spot market when the short is established) and then just plain bs when the books claim that they got a "premium" which is nothing more then the compounding of the proceeds they got from shorting their own product. The game came about because they wanted to push the spot price of gold lower to take out the other competitors and it happened to work with the big picture financial interests of the world financial community. Namely a lower gold price meant that the US Treasury could inflate the value of the US dollar and our trading partners went along with it because it allowed them to export to the US market with a low currency price for their production and stimulate economic activity in their domestic markets. The US gets to print money with no perception in the financial markets of the amount being excessive because the US dollar is able to show a rising trend against it's historical benchmark of gold and therefore there is no inflation, and we can continue to inflate the US dollar money supply almost without check. Nice game if you can pull it off. Barrick of course is just a minor player in this drama, but their participation is critical if you wanted to ensure that the price of gold would continue under pressure.