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Gold/Mining/Energy : Mongolia Gold Resources -- Ignore unavailable to you. Want to Upgrade?

To: Bearcatbob who wrote (3571)	5/29/1999 4:15:00 AM
From: d:oug	Read Replies (1) \| Respond to of 4066

Bob, does <<The $$s all go to money heaven!>> have a Lost & Found ? How about another <<Another simple answer.>> from you to this thread ! Below, from the gold thread, and your take please. Doug Richard: The above ground inventory of the producers is negligible. The gold they are selling forward are their reserves in the ground, deliverable at a future date when they are mined, milled, and cast. To sell this future production today, there is one and only one place that the bullion is coming from, the central banks. Selling inventoried gold does nothing for a companies balance sheet. Selling reserves today converts discounted gold in the ground to the market value it will command on the spot market. Even if companies had a significant amount of inventoried gold, their balance sheets would look dramatically better with the gold remaining on the books, shown as a current assest, and discounts reserves moved up the asset chain to cash equivalents. Inventoried gold is insignificant at best. Ken To: Ken From: ahhaha Good synopsis. Miners borrow from central banks and sell against in-ground delivery. This works as long as a short squeeze doesn't develop or if macroeconomic factors don't force central banks from calling in the bullion loans or stopping the renewal of leases. Gold that goes out of a central bank disappears into the black hole. The forward selling mining companies have to deliver or go to prison. If a short squeeze causes the price to soar, then hedged mining companies have to spend more than expected recovery cost since they must return the collateral now, but they can't get enough out of the ground now to do so. In a hurry the production cost might soar. It takes time to produce and that may mean even higher prices which they can't realize since they have an unfulfilled commitment to deliver much of the in-ground at recovery costs assumed when incurred to be much less. The persistence of forward selling by mining companies abetted by carefree central banks, could see a scramble by mining companies for bullion which creates the squeeze.