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Gold/Mining/Energy : Naxos Resources (NAXOF) -- Ignore unavailable to you. Want to Upgrade?

To: ShoppinTheNet who wrote (7390)	12/16/1997 9:33:00 PM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 20681

S.K. to some degree yes supply and demand will effect the gold lease rate but not as much as you would think. The long term lease rates tend to be fairly stable. You see more supply/demand effects in shorter term lease rates. But if you track long term lease rates they are less volatile than long term US rates. Also your origional post posited that the outright 10 to 15 year futures prices would have seen a large impact from a change in anticipated reserves. The supply demand factors that do impact long term lease rates are the availability of supply from central banks and the desire of producers to hedge long dated production. Even Bre-X wasn't hedging production that wasn't on line yet. There is almost no speculation in the long term sector. Largely this is because the spreads are so wide (a guy has got to make a living). The speculation that does take place is largely inside of the first few years. So when you get out to long term prices it is largely a technical exercise to establish price. Also remember the lease rate is an interest rate and a change in the lease rate will have a smaller impact on the outright price. A 10% move in the lease rate on even a long dated transaction would have an impact on long date outrights of 1% plus or minus. Henry