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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: Broken_Clock who wrote (2677)	12/16/1998 4:05:00 PM
From: sea_urchin	Read Replies (2) \| Respond to of 81118

Papaya : Exactly. But the point I am trying to make is if the mines were unhappy about the situation they would cut back on production and make every attempt to increase the POG by lowering supply in the face of whatever demand exists. (Like OPEC does with oil and deBeers does with diamonds). Instead of which they are making every attempt to produce as much gold as possible (a) by mining in the rich parts, as you mention, and (b) by lowering costs. On the face of it it would seem that they are aiding in their own demise. And, adding to their apparent folly, the big companies are also buying up whatever "good" properties they can. In the circumstances, one would therefore imagine that a gold mining investment should be seen as a wasting-asset and accordingly any income should be amortised. Traditionally, the South African gold shares were sold on this basis and, for this reason, they offered very high dividend yields. But this is not the case today. Increasingly, gold shares are being valued on the basis of their reserves in the ground and, providing the mines are able to keep operating costs down, dividend yields would appear to be unimportant. This would indicate that there is considerable confidence in the present values of the shares. The mines, probably more than anyone in the gold investment business, have to be conscious of the so-called price manipulation which seems to bedevil the gold price (in the minds of certain people). In my opinion, however, it is the increased production and possibly forward selling, rather than manipulation or whatever, that is keeping the POG down. Clearly, if the dollar devalues further or there is a perception of inflation then the dynamics will change. In this regard one should bear in mind that the CRB is at a historic low at present. If gold investors want to make a profit there are two ways they can do it: (a) By going on their hands and knees and praying for an increase in the POG (and if it doesn't rise then cursing the Devil CBs or whatever) or (b) by taking note of the trends in the gold mining industry and trying to follow them. As far as (b) is concerned, as I have mentioned, it is clear that the mines are doing whatever they can, including "cutting their nose to spite their face", in order to make profits now . If POG rises then well and good but, quite clearly, they are not waiting for it.