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

To: barry s who wrote (27862)	2/7/1999 12:38:00 PM
From: John Hunt	Read Replies (1) \| Respond to of 116837

Fly2K: The FAA and the Year 2000 Problem As the end of the millennium approaches, is it safe to be in the air? Part I cgi.pathfinder.com Part II cgi.pathfinder.com ******** Re Gold & Silver Carry Trade Hi Barry, Q - Please explain to me why Inflation enters the formula. A - If you follow back the links, you will see that I reposted someone's comments from the Gold Forum. #reply-7701411 However, IMO the reason inflation is in the formula is that most people who are wealthy enough to indulge in this (or hedge funds) will only purchase investments that increase their wealth after inflation and gold leasing must compete with other investments that do so. A lower gold price is the 'icing on the cake'. Q - Assuming inflation is in the formula, wouldn't an increase in inflation likely be offset with an increase in t bill yields and therefore increasing inflation may not impact the formula. A - Yes, that is true, but the profit margin is small on a percentage basis and I would think it can disappear quickly due to short term fluctuations. We have to remember that gold and silver leasing is done with gold and silver mining companies as well as speculators. The mining companies use the money that they get from selling the gold to make capital improvements and then repay in newly mined gold. The speculators sell the gold and buy T-Bills. With speculators, it is really equivalent to a Gold or Silver Put option that doesn't cost anything (and even nets some cash) and at the same time the government gets to flog some T-Bills ... maybe at a time when the Japanese are selling them? That about all I can say ... I am also still learning about this. John