Which Gold Mines Didn't Fall into the Forward Selling Trap

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Which Gold Mines Didn't Fall into the Forward Selling Trap

On a previous post

"The World Declares Monetary Independence...." http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001Uu3

dave, in a response to rick, mentioned that the mines that had sold forward remained profitable, but that as the gold price skyrockets, they may go bankrupt.

dax also mentioned that only the big mines had/have the power to withstand the prolonged low gold prices we've seen.

So, many of the smaller mines may go bankrupt, one way or the other. Great trap they fell into.

So, of all the mines I've seen mentioned -- DROOY, BMG, Barrick, NEM, HGMCY, Harmony, CALVF, FNMCF, etc., whaddaya think their prospects are, considering above? That is, can one find out which ones are potentially at risk by having sold forward several years of production at minimal prices?

-- A (A@AisA.com), October 03, 1999


dax also speculates (in the same thread referenced above) that the big mining companies would like to get rid of (and/or buy up) their smaller competitors for next to nothing, and that the prolonged low prices facilitates that. "Just a theory" he says. (This was in answer to a question as to why the gold mining companies would participate in -- or at least keep quiet about -- a conspiracy to keep the prices down.)

Read the referenced thread if this right here doesn't make sense to you.

-- A (A@AisA.com), October 03, 1999.


I'm planning on investing in goldmining shares on Monday and have been researching this. I've decided to go for harmony (HGMCY) in South Africa, which is almost completely unhedged. I already have a scad of DROOY (which is also in very good shape), and plan to buy more on Monday. Monday will be an interesting day all around - I'm expecting major ructions at COMEX and maybe the LBMA - we'll see :)

-- Andy (2000EOD@prodigy.net), October 03, 1999.


Also, if a previous posting was correct (that there has been some demand for delivery against some traders that cannot now produce the actual metal, and a US Fed private request to back off on this delivery demand) then this next week may very well see some frantic activity to cover this need. Goldman Sachs took possession of a bunch of actual gold bullion a few weeks ago, and I'm speculating that they knew the Euro Banks would make that announcement, and demand for the physical metal would begin. A lot of traders are going to be in big trouble if demand remains strong, since there is reportedly 3-4 times as much gold being traded on paper as what actually exists in physical inventory at this time. We could see the beginning of massive defaults on delivery demands, and subsequent bankruptcy or insolvency. That would likely create a panic reaction for those who intended to take delivery, resulting in a big price rise for whatever gold is actually available to be delivered. This is the predictable scenario whenever there is such a huge difference between what is being traded on paper and what is actually available for delivery. Demand has thrown a monkey wrench into this market, and it will only get worse in the weeks/months ahead. As long as most central banks elect to hold onto their gold reserves (as they are) there is just not enough physical metal around to satisfy delivery demands. You will note that the last Bank of England sale was at about $255 per oz and one gold mining company in So. Africa alone bought up over 12% of that auction. They could smell the trouble, count on it, and they bought this for delivery at a price below what they could mine it for themselves. The attempt to control gold prices has been lost, and there will now be massive financial failures with the largest traders. Those traders have attempted to cover their short positions during this last week, but that is only the tip of the iceberg for their exposure in this Ponzi game that is now crashing down on them.

-- Gordon (gpconnolly@aol.com), October 03, 1999.

Andy, D'ont be fooled by the gold rally,alot of shorts covering.Gold may go alot higher...lesson i've learned...take profits.When the markets go into cardiac arrest(bubble.com..popping),gold will hold then dive.See 1987.IMHO.

-- dax (dax@here.com), October 03, 1999.


That is NOT what happened during the great depression which started in 1929. Look at the history trail there for clues. While those who were invested in most stocks lost 90% of their value during the following early years of the depression, gold stocks increased in value 10 fold or more. Those who held the gold stocks made out like bandits while most of their traditional friends took a big bath. The only thing that has changed since then is how we electronically trade these investments, not the psychology of the people who do the investing. And the electronic "miracle" can only aggravate and further polarize the traditional markets. Study the years 1929-1935. In my opinion, this is history, about to repeat itself.

-- Gordon (gpconnolly@aol.com), October 03, 1999.

Gord, I agree this is a replay of 1929,only alot worse.Nothing happens in one day,it will unfold in stages.First a crash then panic selling, deflation...lost jobs,bankrupties...$ will fall..paper worthless..Short term I believe gold will follow 1987...I know,I bet crash,gold into the stratosphere(in 87).Fortunately I covered within days lost 30%,my friends who held on waiting for the titanic to sink, lost everything.I know and agree this time it is different...there is no chance of avoiding the iceberg...the supertanker will sink,but short term I am not so sure gold will not dive...unless something really unexpected happens(which is possible)prudent thing to do is to take some money off the table.IMHO.1929, it took the market 2 1/2 years to fall 90%,banks only failed 3years later.The mother of all deflations is coming,and short term cash will be king.

-- dax (dax@here.com), October 03, 1999.

The Sidney gold market opens at 6:00pm EDT. Watch it live here:



-- dave (wootendave@hotmail.com), October 03, 1999.

or here:


Select GLD (gold), 10 minutes, then "REQUEST"


-- dave (wootendave@hotmail.com), October 03, 1999.

I"m going to get this off my chest. My accountant laughed at us for yanking our money out of stocks and putting it on the sidelines until we see what happens with Y2K. He told us were were "stupid" and made us feel like hell.

I hope the son-of-a-bitch loses his ass and ends up on the corner with a tin cup. Nothing would give me great pleasure.

-- (pgnocolly@aol.cam), October 03, 1999.


Gold Fields is completely unhedged. I dont have any, but will try to pick up a few shares in the morning. But as I told Andy, I feel a lot safer with physical. I also have a suspicion that those guys holding all those $390 December and $400 June calls may be in some trouble with possible Comex bankruptcy. Its already being talked about on the gold forums.

Both of the gold graph sites I listed above are down. But you can get 24 hour 15 minute delay quotes at:


Its 9:20 PM EDT and gold is now $308.40


-- dave (wootendave@hotmail.com), October 03, 1999.


I agree it will be an exciting game. The devil is in the details, right?


My accountant didn't laugh, but he didn't believe me either, when I tried to tell him about Y2k a few months back. He said "They wouldn't let that happen to us", really, he did! He's still a good accountant though, and not the only bright person I know who denies this problem exists, or that it will be any more than a bump in the road. I think the ones who openly laugh are the most clueless, or frightened, of them all. I have had stock brokers openly laugh. I have had people that work with computers in their business every day, openly laugh. In no case have I had one of these people able to start even a basic discussion on the issue. At least Flint can discuss it, even if he takes a most optimistic viewpoint, and, he doesn't laugh about it.

-- Gordon (gpconnolly@aol.com), October 03, 1999.

Thanks all!

Dax, i believe that the US $ is essentially toilet paper - we will all find out very soon. So why "take profits" ? What are you going to do with the dollars? if you leave it too late (like now), you will not be able to buy physical Just my opinion. We are in a unique situation here. A battle between the Euro and the Dollar for world currency reserve... and the dollar has already lost... so use your dollars to buy gold - really!

On another forum- this may touch off the dowc crash IMHO...

Ray Patten (10/3/99; 11:30:48MDT - Msg ID:15271) Possible Comex bankruptcy.

On Thursday, my commodity broker said that only market orders were allowed in the Gold options pit...no limit orders. I scaned my 38 years of commodity trading experience to try to remember a similar occurance, but I could not. I thought "These guys must be desperate." Then I looked at the numbers. As of Thursdays close, there were about 525,000 Gold calls outstanding. The floor traders or locals are the people who usually wright or sell us options. They have been getting our money for the last three years. As of September 21st, the committment of traders report said that the large traders were long only about 25,000 contracts. That means that the locals could be naked short over 400,000 calls. With an open interest of just over 200,000, where are they going to find the liquidity to get hedged. If Gold were to go up to $400 per ounce, their loss could be upwards of $4 billion. That could be enough to bring down the exchange.

I've had the idea for a long time that if Gold was ever freed, it would go straight to about $475 without a decent thechnical correction. It now looks to me like it will be there before the end of this month.

It's pay back time, but i'm not going to stay for the last tick. It may be that if the exchange closes, I may get nothing.

-- Andy (2000EOD@prodigy.net), October 03, 1999.

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