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

To: Alex who wrote (19767)	9/25/1998 3:17:00 PM
From: Bill Grant	Respond to of 116762

Interesting "hypothetical" from kitco on the hedge fund problem. kitcomm.com

To: Alex who wrote (19767)	9/25/1998 5:42:00 PM
From: Lalit Jain	Respond to of 116762

Alex, Market estimates gold was short ranged from 30t to 1,000t. Market rumor suggested the fund could be short a significant amount of gold, and any bail-out plan may involve re-purchasing the metal. Long-Term Capital spokesman Peter Rosenthal told Bridge Thursday that the company does not comment on any of its positions. But market estimates it was short ranged anywhere from 30 tonnes to runaway scenarios of up to 1,000 tonnes. Merrill Lynch analyst Ted Arnold said bulls were talking of the fund being between 400-1,000 tonnes short but said he was skeptical of those estimates. "We don't believe the 400 figure, and the 1,000 tonne figure is pure Alice in Wonderland," he said. He argued the bulls were using the fund's plight to talk up the price and said Merrill would recommend scale up selling on a break above $298. However, dealers said Long-Term Capital's financial problem have sparked fears some other international hedge funds and financial institutes could also have problems--encouraging many speculators to rush to buy gold. The UK's Financial Services Authority called on 55 unnamed institutions to reveal their hedge fund exposure in the wake of Long-Term Capital's financial problems, the South China Morning Post in Hong Kong reported today. MACRO-ECONOMIC WOES DRIVING FLIGHT TO GOLD One dealer described a "general anxiety" that funds which were short precious metals may soon cover those positions. "There's a lot of bad (economic) news out there and the metals will benefit from that," he said. A weaker dollar, interest rate cut expectations and lower stocks prices were noted, as were Thursday's reported losses at UBS, exposure to eastern European and Russia at large institutions and extraordinary losses and debts at Japanese firms. Dealers noted that there was little transparency relating to hedge fund positions, and much of gold's rally seen so far was probably based on market fear and a perception fund short-covering may develop--not actual business of that kind. Any confirmed breach of $300, a key psychological level, could produce a spike up to $307-308, dealers suggested. But they were also wary of the move fizzling out at $302-303 and said gold was dependent on macro-economic developments, particularly the dollar and the stock markets. kitco.com