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

To: PaulM who wrote (12234)	5/27/1998 9:55:00 AM
From: IngotWeTrust	Read Replies (1) \| Respond to of 116836

Paul sez: [POG] however is determined by futures contracts. Au contraire! The following is an "old timer's" TSE option floor specialist in one of the world's LARGEST gold mining companies' personal experience/conclusion. The price of gold is determined by derivs, allright, Paul, but not the futures derivatives contracts per se! FUTURES are is the only derivative that is actually anchored to a real, concrete physical commodity. The rest is just papered over, thin air, OTC London Bullion Marketing Association trading/promises: [QUERY] I learned that GT global has a fund (Canadian Income Class) that uses covered calls. I was told that they used off the market options (written for the fund by large firms). How many of Candian options are traded this way? [ANSWER] I assume you are referring to 'over-the-counter' options. The sad fact is that for every option traded on the TSE there are probably 8 or 10 traded OTC. The big firms that engage in this take a huge third-party credit risk (remember Confed Life?), plus they carry an un-quantifiable, but huge, market risk 'off-the-books.' If they, for example, SELL 1000 TXO puts to a third party OTC, they may hedge by selling 80 TXF futures. The problem comes if there is a market 'break' like last October or 1987. If the T35 falls, say 25 points, they are no longer hedged...they must sell more TXFs or TIPs or TXO options--basically anything they can find a bid for. Multiply this by several firms here (and dozens in the States), and there is an almost unbelievable amount of forced selling that would appear in a severe break. Sure gives me pause... [END QUOTE--5/26/98] Hope this helps, Paul. Remember, the LDMA acc'd to their own press releases is trading an average of *38 MILLION GOLD OZS PER DAY* Now THERE's the deriv. problem!!! O/49r

To: PaulM who wrote (12234)	5/27/1998 12:05:00 PM
From: Alex	Respond to of 116836

From Colin Seymors' page.................... "Gold down further in Europe, silver steadies" (see below): A newswire report today [27/5/98] on a Swiss government proposal to halve the Swiss National Bank's required store of gold from 2,600 tonnes. They said that for monetary policy, around half is sufficient, while the other half can be used for other purposes. This is in fact a reiteration of what has already been said, on Friday 24th April 1998, and previously on Friday 24th October, 1997. These proposals as well as requiring approval in Parliament, must also be submitted to a popular referendum. Although opinion polls have shown support for Swiss gold sales, on a much smaller scale, to support charitable funds to compensate for Nazi gold hoarding, the sale of large quantities of gold in abandonment of a Swiss tradition of gold backed currency is an entirely different matter. This was addressed on 5th November, 1997, by USA Gold who reported that "recent polling in Switzerland over the gold issue showed the Swiss people are opposed by a comfortable margin". USA Gold also commented then that any potential Swiss gold sales are likely to be much less than 1400 tons and will be made over a 5-10 year period starting from year 2000. The timing of the original Swiss gold sale announcement coincided with that occasion, on the 23rd October 1997, when the Hong Kong Hang Seng Index closed down -1211.47 points or 10.41% at 10426.30, as a result of currency speculator attacks on the HK currency peg against the U.S. dollar. The intraday drop of 14.6 percent was the biggest recorded since the 1989 Tiananmen Square massacre in Beijing. The very day after this major event in world markets, i.e. Friday 24th October 1997, the Swiss National Bank and the Swiss Finance Ministry made the original "disposal of 1,400 metric tons of gold" statement. Then, gold dropped $16.10/oz to $308.60 after a group of experts appointed by Swiss National Bank and the Swiss finance ministry proposed selling 1,400 tonnes. Just a few days after the HK drop and the original Swiss gold announcement, we had the "mini crash" of October 1997! The Dow Jones ended October 27th down -554.26 ( a record points drop ) at 7161.15. On the way it triggered not one but two of the larger market curbs ( halts in trading ) that were put in place after 1987 to prevent another crash- the first time that these levels had been triggered. With "Asian markets on their knees" overnight, yesterday's falls in the US indices, and a 2% fall in the FTSE100, can it be any coincidence that the Swiss trotted out this gold announcement once more when world markets look weak? There is no doubt that gold is a political metal, and has been since ancient times. "This is true for the very simple reason that Gold in its historical role as a currency is fundamentally incompatible with the modern worldwide financial system" - See The Privateer. The Privateer also commented in a past editorial that "It should be pointed out that the Swiss people hardly ever agree to anything via a referendum." When gold rises, the risk of inflation is seen, which would be a plus for interest rates and returns on bonds, and a negative for stocks. A rising gold price would suggest that there is another place for "flight to safety" funds to go to. A lower gold price also benefits those with short positions in gold, of which there are approximately 8000 Tonnes outstanding, according to noted analyst Frank Veneroso. With a "flight to marks and Sfr" also being reported today, could it be that the US and the Swiss are cooperating to limit the flow from dollars to Swiss (gold-backed) francs? So why have the Swiss brought up the gold sale question TODAY? You are invited to make your own conclusions! users.dircon.co.uk