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Welcome to the USAGOLD Gold Discussion Archives. The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets...   (Discussion Forum Hall of Fame) (The Gold Trail) ("Thoughts!" by ANOTHER)   The opinions posted by all guests are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of the public discussion shall therefore not be construed as an endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.

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ARCHIVED DISCUSSION FROM 2/8/2006
All times are U.S. Mountain Time

(Yesterday's Discussion.)

contrarian (2/8/06; 23:38:19MT - usagold.com msg#: 141508)
Dollar in Brazil
I just spoke to someone who regularly travels to Brazil, he just returned from there, and he says that there has been a change there in attitudes towards the US dollar. He was referring specifically to Rio and San Paolo. He says that most people are now loath to accept dollars in transactions, preferring the Brazilian real, which is, of course, a reversal of relatively recent past attitutes. In other words, the dollar is now considered trash there.

He did say that in Buenos Aires, Argentina, there is not yet this attitude, but it has certainly taken hold in Brazil.

This is very interest on the street information, and I can think, only a harbinger of things to come.

TownCrier (2/8/06; 22:59:27MT - usagold.com msg#: 141507)
Gold Rises in Asian Trading After Biggest Drop in Eight Years
http://www.bloomberg.com/apps/news?pid=10000085&sid=aa2ZFYVTYx8E&refer=europe
Feb. 9 (Bloomberg) -- Gold in Asia rose as some buyers decided the biggest decline in more than eight years this week has made the precious metal a more attractive investment.

Gold for immediate delivery on Feb. 7 had its biggest one- day drop since 1997...

``Investors don't want to miss the buying opportunity,'' said Song Won Deog, general manager at Woori Futures Co.'s marketing strategy team in Seoul. Song predicts gold will reach $570 an ounce next week...

Gold futures for April delivery rose as much as $8.90, or 1.6 percent, to $562.70 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange after losing 3.6 percent in the past two days.

``Price corrections in the metals provide opportunities, especially for physical consumers in the industrial metals markets; don't miss the boat, again,'' Barclays Capital said in a report yesterday.

^---(from url)---^

Departing boat metaphors are nice, but at the end of the day, gold metal is something you've either had the wits to acquire as a prudent addition to your portfolio, or else you haven't. Simple as that.

R.

Shermag (2/8/06; 22:39:05MT - usagold.com msg#: 141506)
Ovs
You disagree. Perhaps for good reason.

I believe he is talking to shore up his legacy (or at least what he wants it to be). But I ask, who is he fooling? Who is his intended audience?

Goldilox (2/8/06; 22:37:18MT - usagold.com msg#: 141505)
Ancient penny to remain in Britain
http://www.iht.com/articles/2006/02/08/news/coin.php
snip:

A rare 1,200-year-old Anglo-Saxon gold coin that was sold at auction to an American collector will not be leaving Britain after all.

The British government blocked the export of the coin last year, and the British Museum has raised the funds needed - more than $650,000 - to buy it back. The acquisition was announced in London on Wednesday.
A treasure hunter discovered the coin in 2001 in Biggleswade, on the banks of the river Ivel about 100 kilometers, or 60 miles, north of London, using a metal detector. The gold penny, called a mancus, weighs about 3.5 grams, or an eighth of an ounce, and is slightly larger than an American penny.

The coin is highly desirable, according to numismatic experts. Not only is it in good condition, it bears an exquisite portrait of Coenwulf, King of Mercia (796-821), the only depiction of him known on a gold coin. The reverse has a design inscribed "De Vico Lvndoniae," identifying the Anglo-Saxon settlement, now London, where it was minted.

The coin's sale in October 2004 set a record price for a British coin. The buyer was Allan Davisson, a collector and dealer from Minnesota, who paid a little more than $400,000. But Davisson was blocked from bringing his prize home. David Lammy, the British minister responsible for protecting cultural heritage, announced in August that he would give the British Museum time to raise extra funds to buy the coin back. The deadline was Feb. 2.
The British Museum was able to tap sources including the National Heritage Memorial Fund, which is supported by lottery income, and is "very happy" with the outcome, according to Hannah Boulton, a museum spokeswoman.
The tug of war over the coin illustrates the workings of British law on antiquities. Considered more liberal than other countries, Britain allows those who find buried treasure to receive fair market value for it.

Davisson conceded in an interview in January, "I definitely thought this coin was worth more than I paid for it." Although the British Museum did bid in the auction, its limited funds forced it to drop out. Davisson later resold the coin to an American collector for $650,000. The British government accepted the new, higher figure as the bona fide value that should be paid for the coin.

Boulton said there was no paradox in that Britain, which has refused to return such famous antiquities as the Rosetta Stone to Egypt, is trying to block export of an item like the coin. "It's not a comparable situation," she said. "These items are all part of a wider world collection. Visitors to the British Museum can compare and contrast cultures from all civilizations - that is a concept worth defending."

In the United States, Davisson confessed to having mixed feelings. "Emotionally, I wish I could bring the coin here, but intellectually, I know it belongs in the British Museum."

-Goldilox

I wonder what Gordy Brown thinks of all this hullabaloo over a "gold penny" during his run for No 10.

Chris Powell (2/8/06; 22:02:27MT - usagold.com msg#: 141504)
Beg your pardon, OvS and Goldilox
At least I didn't confuse you
with Alan G!

Rook (2/8/06; 21:33:42MT - usagold.com msg#: 141503)
.,.
Yeah Mikal, I agree, I am glad Black Blade is here to fill in gaps in the info others bring us. Hey BB, no fair, if you are going to tell us about your travel schedule, you have to include some travel commentary in your posts as you do your tour.

Black Blade (2/8/06; 20:45:34MT - usagold.com msg#: 141502)
Re: Mikal
It's looking like this year will probably be slow for petroleum fieldwork. The warm weather has left significant supplies of NatGas in storage. We now appear to have over 700 Bcf more in storage than what was anticipated for this time of year. Tomorrow's NatGas storage report looks like it will be another dismal draw – about 71 Bcf if ICAP data is correct. We simply did not get a winter this year and therefore no natural gas demand for heating. It's possible that some companies will drill new wells but I suspect that much of the work will be in some development work and for current production. There is no need to drill more wells and bring more product online when storage is nearly full. Right now companies are preparing budgets. I have a couple of clients that might need some work but they don't appear very excited about the prospects this year, even with current prices.

However, the mining sector is looking much better. I have talked to three old former clients and the prospects are brighter in the precious metals sector. They appear excited about the higher prices and of course they need to replace or develop new reserves. Who knows, I may have to set up shop in Elko, NV again (or Winnemucca). They also have seen the light and appear willing to raise rates for contract work after most of the experienced workers left mining for petroleum work during the last mining bust. They now find themselves short of explorationists with inexperienced personnel and recent grads not trained in exploration and development work. Anyway, next month I plan to travel to Nevada, Utah, and Colorado to talk with some people I know. Dang, give up the Yellowstone-like view for the Great Basin desert? Hmmm…

- Black Blade


David Linkley (2/8/06; 20:35:17MT - usagold.com msg#: 141501)
Greenspan
Greenspan's comments the other day show just how incestuous the international financial community has become. The world economic base now sits on sand and the next real storm is going to topple alot of complacency.

As much as I dislike Bernanke as Fed Chairman, one has to feel for him as the economic storm about to hit. One by one real estate, auto sales, retail, consumer electronics and so on are about to experience a severe drop off in sales. The credit machine is sputtering as the rest of the world is getting tired of so many dollars.

mikal (2/8/06; 20:12:31MT - usagold.com msg#: 141500)
@BlackBlade
Always enjoy your postings. Are you anticipating another busy year in the field after the thaw?
It's back to cold weather here in the northeast.

mikal (2/8/06; 20:08:42MT - usagold.com msg#: 141499)
@Pritcho
Buy and hold.

PRITCHO (2/8/06; 19:46:42MT - usagold.com msg#: 141498)
From Richard Russell - - - Latest Comments
http://ww1.dowtheoryletters.com/DTLOL.nsf
Sage advice from an 81yr old veteran. No Frost Bite here.

February 8, 2006
SNIP:
Frankly, if I wasn't in this business, I probably wouldn't look at the daily price of gold. Since I have no intention of selling my gold, why look at it every day. I don't ask my broker for his estimate of the value of my house every day or every week or every month. I don't give a damn what my house is worth, since I know I will never sell it.

In other words, if you hold a tangible asset and have no intention of selling it, why drive yourself crazy pricing it all the time. This is the way many a fortune has been made. And investor buys some land or a few outstanding stocks and instead of trading them, he forgets about them. In 10 or 20 years, that land or those stocks are worth a fortune. If he the same investor had been pricing his items daily, somewhere along the line he would have become uncomfortable or frightened and bailed out.

This, of course, shows the great advantage the wealthy individual has over the "little guy." The wealthy investors buys a stock, and it represents only a small fraction of his net worth. In fact, the wealthy investor hardly looks at the stock's fluctuations. The fluctuations don't affect him, they don't really change his total asset position one way or the other.

In other words, the wealthy investor is in a position to hold the stock regardless of market conditions. In the end, the stocks fluctuates, it corrects, it hits new highs, the declines, and over the years the stock hits ridiculous new highs. Finally, on a valuation basis, the investor sells. But only the wealthy investor has been able to hold this stock until the point where it became absurdly overvalued.



Black Blade (2/8/06; 18:41:31MT - usagold.com msg#: 141497)
Precious and Base Metals are rebounding nicely in Asian Trade
Tonight the Precious Metals (Gold, Platinum, Palladium, Rhodium, and Silver) and the Base Metals (Copper, Zinc, Nickel, Moly, etc.) ate trading higher in Asia. As I pointed out this morning - the mad dash for the exits was temporary and the weak hands and fund traders have had their fun. Now back to business. Hopefully some of you took the opportunity and accumulated more of physical today by a little trip to raid the Castle Treasury on this pullback. It was a nice gift from the traders and weak hands to those who seek "portfolio insurance".

Yesterday and to some small extent today the sell-off was simply a matter of profit-taking by funds that ran the price higher while while simultaneously placing short positions for a quick scalping. They did manage to scalp some quick profits on the sell-off, however, the "correction" ran out of steam because their just isn't much interest to divest hard assets in this secular bull market and especially when other sectors look rather grim - bonds, stocks, currencies, etc.

The cascade of selling in the natural resources sectors (and paper financial vehicles as well) led the panicked weak hands into the orchestrated sell-off driving the price dramatically lower. This is an old story that has played out time and again. The real point to all this is the overall trend is higher because we are in a "secular bull market" for hard assets and natural resources where macro-economic issues prevail over short-term position plays by funds. It's really nothing more than that - now that the shorts have had their moment in the sun - it's back to business.

Long-term the trend remains exceptionally bullish. In short - be prepared as it is everyones responsibility to to "look out for number one" and their families, after all no one else will - not even the "benevolent hand" (or "Iron Fist") of the government. The only one you can really trust when the chips are down is yourself.

As always, get out of debt and stay out of debt, stash enough emergency cash for several months expenses, accumulate Gold and Silver for wealth preservation and as "portfolio insurance", and start a storage program of nonperishable food and basic necessities.

- Black Blade


OvS (2/8/06; 18:31:06MT - usagold.com msg#: 141496)
Christopher P.
You can call me lox,
but please don't call
me Goldie.
Otherwise, you are my
man. Keep it up. OvS

Goldilox (2/8/06; 18:29:01MT - usagold.com msg#: 141495)
Correction and Recovery
@Sundeck,

You hit the nail on the head.

I "flipped" 1/3 of my gold stocks in Sinclair fashion in the few days. I got nowhere near optimum exit and entry points, but I reallocated some cash and have all my original holdings intact with a couple new ones. It was not easy, and exhausted my supply of Maalox. I probably won't elect to try that again soon.

Today's recovery came rather quickly, but so did the last one. Buyers of physical metal and mining equities are definitely looking for entry points.

Ned (2/8/06; 18:28:06MT - usagold.com msg#: 141494)
Correct this man.....
"The market needs a correction. It can't just carry on going up," said Jeremy East, global head of precious metals at Commerzbank. "I still think we are going to see higher levels at the end of the year or maybe in the next few months, but at the moment we are seeing some profit-taking and stop-loss selling."



.....

We are going to see a "correction" (to the north side) before end of March.

There's your "technical analysis" for the day Jeremy.

Goldilox (2/8/06; 18:18:16MT - usagold.com msg#: 141493)
Russell
@ Chris Powell,

Are you confusing me with another poster? I never even mentioned Russell.

My post about GATA and the "history books" should be construed as a reflection on the manipulated slant of academic historians more than any negative statement about your fine work. In my estimation, I put you in some pretty fine, though publicly derided, company.

G'lox

OvS (2/8/06; 18:08:10MT - usagold.com msg#: 141492)
I disagree, Shermag.
They probably paid him
another 880,000 under
the table for trying to
sweep away 18 years of
stealthy footprints in
the financial sands.

Flatliner (2/8/06; 17:55:10MT - usagold.com msg#: 141491)
Just watching
http://www.nymex.com/media/delivery.pdf
NYMEx Issues for February.

Silver 200 (up from 199) or 1,000,000 ounces (up from 995,000).
Gold 6,057 (up from 5,664) or 605,700 ounces (up from 566,400).


Total Eligible in golden warehouse 2,290,560 (up from 2,238,478). Total registered 5,086,510 (up from 5,080,284).


Sundeck (2/8/06; 17:46:05MT - usagold.com msg#: 141490)
Hounds hunting well in Asia
Oh, oh...looks like the hounds are onto the scent of something in Asian trading...gold up $7 and silver up 13c...go Spot! Hi ho Silver! Away!

If the last "correction" was anything to go by, back in December, the present one may be all over in the blink of a miners eye...that's the trouble with trading in and out during a bull-run, often the volume available on the way back up to the initial price level is a LOT less than the volume that was given up on the way down...mostly means entering the market at a higher level than that at which you sold...strong hands win over weak hands...

Good luck boys and girls...

(I just love them dogs...)

;-)

Flatliner (2/8/06; 17:45:43MT - usagold.com msg#: 141489)
Deflate, reflate?
Anyone feeling light headed? Gold makes solid ballast.

real1 (2/8/06; 17:27:00MT - usagold.com msg#: 141487)
I would like to share my gold & silver charts with everyone
And since i cant upload to your site the only way is to supply the link.

Anyway Im sorry...

mikal (2/8/06; 17:23:03MT - usagold.com msg#: 141486)
The Bernanke era
http://www.prudentbear.com/internationalperspective.asp
International Perspective, by Rob Lee
The US Economy and Markets may be heading for a Bernanke 'Trap'
February 8, 2006 - Excerpts -
"...Here is a successor who has promised to follow in Mr Greenspan's footsteps. Indeed he is on record as supporting or contemplating an even more aggressive use of monetary policy in circumstances of crisis. So no problem then. If the economy or markets show signs of turning down, Mr Bernanke can be relied upon to work the same magic, and then some. This seems to be the consensus view, but I think it is wrong. I think that the US economy and markets are heading for a trap..."

Someone was bound to post this gem. Much original and important thinking in this one page effort. He succintly lists many serious challeges ahead including some all too familiar:

"In my view US monetary policy already is tighter than intended or perceived, and is likely to become more so in the early part of Mr Bernanke's term in office. Thus the US economy is heading for recession and the stock market for a major downturn. I expect this for the following reasons:
1. Monetary policy operates with long lags, in the US as much as 12-18 months."Therefore even if rates are not raised any further there is still a considerable degree of tightening to come. The remarkable growth in the use of adjustable rate mortgages in recent years may accentuate this factor, as very large numbers of mortgages revert to market rates over the next two years.
2. Although interest rates are relatively low in historical terms, whether real or nominal, they may still prove uncomfortably high in the context of unprecedented debt levels. Furthermore, the degree of tightening that has taken place - a cumulative 350 basis points in the Fed Funds rate - is already more than that which has led to recessions in the past.
3. The underlying economy is probably already weakening significantly..."

TownCrier (2/8/06; 17:16:37MT - usagold.com msg#: 141485)
real1,
http://www.usagold.com/cpm/aboutcpm.html
Sorry to delete that post, but thus far your brief posting track record looks highly suspect -- precisely as someone fishing for traffic to feed the advertisers on your blogspot site. That's an abuse of our own host's hospitality, and as such is contrary to the posting guidelines. Please keep it in check.

For more insight into this website/Forum's generous host, see the given url. Let's try harder not to cross them up or otherwise try to make hay at their space and expense, ok?

R.

USAGOLD Daily Market Report (2/8/06; 16:07:22MT - usagold.com msg#: 141483)
Page Update!
http://www.usagold.com/DailyQuotes.html
The Daily Gold Market Report has been updated.

If you are considering investments in gold we invite you to request our free introductory information packet detailing the products and services offered by USAGOLD ~ Centennial Precious Metals. We welcome your inquiry and look forward to working with you.

WEDNESDAY Market Excerpts

February 8 (from Reuters) -- Gold steadied above three-week lows on Wednesday, supported by new buying interest from the jewellery industry and investors after tumbling the previous day on a wave of fund selling, analysts said.

The longer-term outlook remained positive and the metal was still seen hitting new highs this year, surpassing last week's 25-year peak of $574.60 an ounce, they said.

"The market needs a correction. It can't just carry on going up," said Jeremy East, global head of precious metals at Commerzbank. "I still think we are going to see higher levels at the end of the year or maybe in the next few months, but at the moment we are seeing some profit-taking and stop-loss selling."

[Action Economics said a sharp yen rally had squeezed out Japanese and other yen-funded margin accounts from long gold positions.]

COMEX benchmark April contracts finished at $553.80, down $1.00, after trading from $556.40 to $548.50. At its 25-year peak, gold was 11 percent higher from the price at the start of this year.

Tensions over Iran's nuclear ambitions, worries about the dollar outlook and firm energy prices had lifted prices on top of an 18 percent gain in 2005.

"I think we will probably see another couple of little tests lower in the next few days, but as a whole the trend is still very firm," said James Moore, analyst at TheBullionDesk.com.

Some physical buying emerged with a drop in prices as jewellers purchased the metal to refuel their inventories, which had sharply fallen because of cautious buying in the previous weeks, dealers said.

Many dealers in India, the world's largest gold consumer, seized the fall in prices as a good buying opportunity. Demand was good and expected to intensify further, said Indian dealers.

---(see url for full news, 24-hr newswire)---

mikal (2/8/06; 14:17:59MT - usagold.com msg#: 141482)
Gold as a Hedge
http://www.freemarketnews.com/WorldNews.asp?nid=7135
Global Markets Not Pricing in Risk: Gold is Hedge - Dr. Gerard Lyons - 02/08/06 Short article with a middle east tone.

Shermag (2/8/06; 13:20:27MT - usagold.com msg#: 141481)
Greenspan's reason for gold's strength of late
Snips from the Timesonline article:

"Alan Greenspan, who stepped down last week as chairman of the US Federal Reserve after 18½ years, yesterday blamed the threat of terrorism for the soaring gold price... Mr Greenspan said that the high cost of gold did not reflect inflation or the strength of commodities but rather a fear among investors of a major geopolitical conflict ... nuclear weapon could be detonated within five years..."

No mention of:
- Huge and growing deficit in US balance of payments.
- Huge and growing Federal budget deficit.
- Precaroius balance of supply and demand in oil and natural gas.
- Signs that the US housing market, a pillar of the economy, is turning down.
- The notion that the Fed is now under the control of an avowed inflator (Helicopter Ben).
- Years of outside-of-sustainable growth in US money supply.
- The impending disappearance of a highly watched measure of money supply, M3.
- Massive builds in US dollar reserves in Asian and other CBs.
- Numerous statements from those countries about the desire to diversify out of those US dollars, and specifically moreso into gold.
- Citizens of the US with more debt in relation to income than ever before.
- A quagmire in Iraq.
- A tempest in Iran.
- A dilemna in Palestine.
- Declining mine supply.
- Growing demand from the nouveau affluent in China and India.

It was speculated that they paid him $120,000 for the speech. They should ask for a refund.

OvS (2/8/06; 12:54:43MT - usagold.com msg#: 141480)
YGM
Darn it, if you didn't
hit the spot. Even us
old salty dogs don't
mind a kind word or
two.
A couple for the road
from good ol' Oscar:
Education is an admir-
able thing, but nothing
that is worth knowing
can be taught.
In life we are all in
the gutter. Some of us
just tend to look up
at the stars.

YGM (2/8/06; 12:30:13MT - usagold.com msg#: 141479)
Inelastic Gold Supply
http://www.freemarketnews.com/Analysis/65/3716/2006-02-08.asp?nid=3716&wid=65
great commentary by Willie as per usual.

YGM (2/8/06; 12:19:44MT - usagold.com msg#: 141478)
OvS
I'm thinking you're just another old salt who has been around the Mtn and over the hills a time or two. Judging by your reading research material I can see you still get around :-)
Nano Particle Technology is going to revolutionize a thing or two yes? Happy reading. The urge to learn is a great & wondeful thing, even for us old salty dogs..Ken

Chris Powell (2/8/06; 11:31:27MT - usagold.com msg#: 141477)
The difference between help and timidity
http://www.grandich.com/docs/alertGL_02-08-06.pdf
Peter Grandich endorsed and publicized
GATA's work again in his letter, linked
above.

Goldy, I don't take Russell's timidity
personally. He's important to me simply
to show others what the gold cause is
up against. He's a bit like the World
Gold Council. Both know better or are
supposed to and both are considered
advocates for the gold cause but both
do a tiny fraction of what they could
and should do. In his sleep Bill Murphy
does more for the gold cause than
Russell and the WGC do together, for
then he's at least resting up for striking
the blows that Russell and the WGC are
too timid to strike even as their
resources are so much greater.

TownCrier (2/8/06; 11:03:55MT - usagold.com msg#: 141476)
Mini-helicopter action -- Fed buys $1.25 billion in Treasury coupons
The trading desk for the Federal Reserve entered the open market today with an outright purchase of U.S. Treasuries, thus adding $1.25 billion in 'permanent' funds to the nation's money supply with a fresh injection of cash created expressly through the course of this operation.

Paper is easy -- it comes and goes. Gold has universal permanence. Choose the form of your savings wisely.

R.

OvS (2/8/06; 11:03:15MT - usagold.com msg#: 141475)
YGM
I think you are an old salt
Yucan Gold Miner and a hell
of a good writer.
But you and Chris take Guru
Russell's silence (inspite
of Gata's constant urgings)
too personal.
The man created himself quite
a following and made many a
good call aside from gold.
To go deadahead against your
own government's secret dealings
is not everyone's cup of tea.
Not everyone is a "wild place
prospector" like you, nor an
Irish x-football player (who,
by the way was physically attacked
under suspicious circumstances),
like Bill Murphy. Don't get me
wrong: I admire both of you very
much.
It is also easier to tell the
truth in Canada where things are
a little more layed back. In the
USA, we have not only Washington
DC but also a sharp clever and a
bit ruthless New York crowd to
deal with. It's no coincidence
that Sinclair, who lives in Conn.
registered his Tanzanian Explora-
tion Co. in Canada.
Now, let me go back to researching
another great catalyst:molybdenum,
which, like gold and silver, has
great promise for nano technology.

Goldilox (2/8/06; 10:34:40MT - usagold.com msg#: 141474)
Weak Hands
@BB,

Great post! So many illicit activities are coming to light on the financial and geopolitical fronts, that they all must compete for any coverage at all, especially from the "Bought and Paid-for" News.

When you describe the "weak hands" getting washed out, I think of those who ignore Sinclair's warning about "avoiding margin on all things gold".

While yesterday's concerted attack was powerful, it was not nearly as painful to those who own the stocks outright, and especially those who own "gold-in-hand".

Black Blade (2/8/06; 10:20:51MT - usagold.com msg#: 141473)
Inelastic Gold Supply
http://www.freemarketnews.com/Analysis/65/3716/2006-02-08.asp?wid=65&nid=3716
Inelastic Gold Supply

Snippit:

This article attempts to establish the notion that as the gold price rises, the mine production industry will not bring significantly more gold to market. In addition to other obstacles, they will be stymied by hedge book losses, sure to drain valuable funds. They will face large obstacles from rising costs, such as for energy and construction materials. They must overcome labor shortages. In the year 2005, the gold industry has produced a mere 2% more gold than the previous year. The reasons for the shortfall in what might be expected in mine output are many. Abusive hedge practices are one reason in my opinion for the shortfall. More difficult mine venture projects is another. The conclusion is that a much much higher gold price will be required to encourage sufficient supply in order to meet demand and avert shortages. The prospect might spell greater profit for leveraged physical gold and silver investors than stock holders. However, the unhedged mining firms will see staggering gains in their stock price.


Snippit:

HEDGE BOOKS & INELASTICITY

Barrick Gold hedge book losses have begun now to be quantified. Don't expect setbacks are over for either this firm or other hedge device abusers. Barrick was once accused of being a financial firm masquerading as a gold miner, for the unexpressed purpose of selling forward gold contracts far in excess of actual production. Its entire existence is an anomaly, most likely from its inception being a corporate illicit hedge apparatus, a gold cartel tool. Their senior management hailed from financial firms, not mining firms, and surely not of geologist background. Their central unstated non-chartered modus operandi was founded in neglect of their mine operations, sure to exacerbate their future (like now) gold output. Their reported 13 million gold ounce short position vastly eclipses any future production schedule, an outpouring of acid on their balance sheet of as much as $560 million lost in a single recent quarter. To put that quantity into perspective, 13 million oz short position exceeds all gold exchange traded fund (ETF) holdings. In the past six quarters, try imaging the harsh reality of a $1000 million loss for Barrick.

Anyone who cannot conclude that their acquisition of Placer Dome was motivated by a desire to blend acid with some valid production and cash (alkaloid) is naïve at best or blind at worst. Their combined short position is 21 million oz gold. To date, a $3 billion loss on the Barrick books is staggering, but that amount is likely less than half of the sum necessary to close out their "ingenious" hedge book. Again, perspective is needed. Such a cumulative loss over the years offsets the entire profit generated by Barrick from its ill-designed inception. One can serve up Barrick in an MBA business school program as the quintessential hedge disaster in all of history. My view is that at least one mining firm, and very probably Barrick, will blow up in the next derivative disaster with full publicity and notoriety. My conjecture is that Fanny Mae already blew up, but its publicity has been smothered in secrecy under the aegis of the US Federal Reserve. My other evil conjecture is that the USFed is illicitly transforming Fanny Mae mortgage backed bonds into US Treasury Bonds. Does anyone watch? Does anyone care? Does the law even apply? Are laws relevant to the game anyway?

Finally, the point to be gained from this line of thought is that Barrick, like some other gold miners, has been forced to exhaust its precious cash position. They have therefore denied themselves needed funds for mining operations, to satisfy their charter for gold production (seemingly a nuisance), in order to secure current precious metal output. They aint producing anywhere near as much gold, silver, and other byproduct metals due to their greed, stupidity, arrogance, and fractured fallacious phony business plan. The irony is that first, miners are buyers of gold contracts in a very very big way. Second, as the gold price rises, they might actually produce LESS GOLD. They are being bled dry of cash. A mining stock investor must lick chops, salivate, and find glee in their highly deserved misery. Overly hedged gold miners actually produce less with higher prices.


Black Blade: This is a good article and I can't do it justice with only a couple of snippits here. The author really outlines the difficulties ahead for one of the more notorious mega-hedgers. Other elements of the piece are interesting as well.

The action yesterday in the precious metals was rather amusing for those of us in the metals market. Hedge funds exited en masse in a wild bear raid scalping gains from quickly built up metals short positions. Obviously nothing had really changed as far as the fundamentals are concerned, but the run was somewhat entertaining and amusing as the sudden price drop afforded yet another opportunity to buy the undervalued asset. No undervalued investment or hard asset goes straight up in price but is always punctuated by temporary pullbacks (corrections?) as it seeks its true value. Yesterday was really no different. Now that the weak hands have been shaken out its "back to business".


YGM (2/8/06; 10:11:26MT - usagold.com msg#: 141472)
Goldilox
Thanks for the link..Yes I'm sure I used the word "History" books a little to loosely. I would expect that "type" of history to be written by the likes of Ravi Batra etc or the recently departed Ferdinand Lips. The GATA experience may not have been perfect (what or who is?) but nonetheless it has been the most outspoken & effective advocate Gold ever had IMHO...YGM

Goldilox (2/8/06; 09:54:32MT - usagold.com msg#: 141471)
"History Books"
http://www.commondreams.org/views05/1017-28.htm
@ YGM,

"The Gold Anti Trust Action will be spoken of in history books in future and if that is not yet realized, it will be. A shining example of dedication, fight and standing for one's beliefs by a very few, thru years of belittlement and spiteful critique."

While certainly deserving, it is incredibly naive to believe that "mainstream history books" will mention GATA at all. I still have yet to see a "mainstream history book" that outlines the underhanded collusion in Roosevelt's gold confiscation, the real origins of the FED, the real Lusitania event, or the truth about Pearl Harbor. Most don't even mention that PH was in response to the oil embargo imposed upon Japan, citing it as an unexpected, unprovoked attack.

Remember the "Iran hostage crisis"? In order to whip up the war fever, TPTB are now telling people that they froze $Billions of Iranian government money in reponse to that event, reversing the "historical order". The banks froze that money for the deposed Shah, and the US consulate staff were being detained until the funds were unfrozen and returned, most of which remains on the smiling banksters' books.

Given the number of anti-establishment purges from history in the last century, GATA certainly qualifies with the likes of Nicola Tesla, Wilhelm Reich, Sibel Edmonds, Catherine Austin-Fitts, Jim McCanney, Frank Zappa, John Lennon, Charlie Chaplin, and many, many others who have disputed the mainstream "story" and found themselves "blackballed" from history or worse.

Those who write the "mainstream history books," like the "mainstream science books," are every bit as master-serving as Greenspan is showing himself to be, with all dissenters duly labeled as "Kooks and Conspiracy Nuts".

See the attached URL for a more complete description of the "process".

USAGOLD / Centennial Precious Metals, Inc. (2/8/06; 09:47:43MT - usagold.com msg#: 141470)
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