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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (63396)	6/12/2006 8:41:02 AM
From: Tommaso	Read Replies (1) \| Respond to of 110194

I wasn't following the gold companies that closely, but there certainly were some, Australian, I think--and one major producer--who got into serious trouble as the price of gold began to rise. Somewhat like banks with their "carry trade," they had been profiting for years by selling future production at higher prices, and when the contracts came due, buying them back in at a lower price. usagold.com google.com As large mining companies begin to unwind their hedge book, more gold will be taken off the market which is bound to further aggravate the supply deficit. As the price of gold rises, more of those hedges will have to be unwound or else many of those companies could find themselves at a severe loss. Key support levels to watch out for are $320, $325, and $350. If gold rises to those levels, the price could begin to explode because of short covering. If gold begins to surpass those levels, many bullion banks could experience severe financial difficulties. This could spell trouble for the largest hedger of them all -- Barrick -- which has hedged 23 million ounces of its production. Barrick has sold close to four years of its future production. The only way that this major short position could be covered would be for central banks to clean their closets of gold -- a frightening thought that could only send gold prices even higher. financialsense.com