(GOLD) What's going on in Sydney?

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

The Kitco graph looks like somebody spilled their coffee on it. I know gold is a volitile commodity these days, but could some one explain the latest?

-- Lon Frank (lgal@exp.net), October 31, 1999


Well, they just corrected it, so I guess sombody DID spill their coffee. Still looks pretty radical.

-- Lon Frank (lgal@exp.net), October 31, 1999.

What's the url on that graph Lon?

thanks in advance,


-- sean (which@coffee.stain?), October 31, 1999.


http://www.kitco.com/gold.graph .html

Stan puts up a hot link on most gold related threads. (But that's just because he's a lot smarter then me.)

-- Lon Frank (lgal@exp.net), October 31, 1999.

Looks like "cut and paste" Andy ran with his tail between his legs again. Gold fell off the Sydney charts.

-- (AndyHawk@weAreMorons.com), October 31, 1999.

It's a Kitco halloween joke you fucking moron.

-- Andy (2000EOD@prodigy.net), October 31, 1999.


Bite a frog in the a$$.


-- sweetolebob (buffgun@hotmail.com), October 31, 1999.

For the spot price of gold:
http://www.kitco.com/gold. graph.html

For the spot price of silver:
http://www.kitco.com/sil ver.graph.html

For the spot price of platinum:
http://www.kitco.com/p latinum.graph.html

For U.S. Markets and stock quotes:

For Major World Indices:

Stan Faryna

Got 14 days of preps? If not, get started now. Click here.

Click here and check out the TB2000 preparation forum.

-- Stan Faryna (faryna@groupmail.com), October 31, 1999.

Straight down in Sydney, now strait up in Hong Kong. I'm geting sea-sick.

Come on Andy, ignore the trolls and let's have your take on this.

(SOB, you can spit out that left over Halloween candy and jump in here too. Nice to see you, BTW)

-- Lon Frank (lgal@exp.net), October 31, 1999.

OK Lon, you got it.

Theses two pieces sum it all up - just be patient! I hope you are stacked to the gills with gold like I am, you will not be "unhappy" that you loaded up!


"The global financial system is presently in the midst of the third "LTCM-type" crisis of systemic dimensions, since the LTCM hedge fund had to be rescued, at enormous cost, in September 1998, and the Tiger Fund had to be bailed out in June 1999 because of its Japanese "yen carry trade" exposure. This time, the gold carry trade of US and other financial institutions, has become a systemic threat. Following the sharp post-Sept. 26 rise of the price of gold, financial institutions with vast "short positions" on gold, i.e., having speculated on an ever-lower price of gold, have faced very serious liquidity problems.

According to informed market insiders, key central banks, most notably the US Federal Reserve, have been involved in covertly manipulating the gold price downward during the past two weeks. In a few weeks, if the gold price were manipulated down to the level of $280-$300, it would permit the highly-leveraged gold carry trade positions of New York banks - Chase Bank, J.P. Morgan, Morgan Stanley and others - to be closed down. These moves would be similar to what was done during June, to ease the Tiger Fund out of its Japan yen carry trade exposure. The Federal Reserve has reportedly intervened with derivatives or gold call options on the New York Comex exchange, in order reverse the gold price rise.

Gold market sources have pointed to one of the world's largest mines, Barrick Gold, as an example. Were the price of gold to have broken above $335 per ounce two weeks ago, Barrick Gold would face financial ruin on its gold forward contracts. A default by Barrick would severely impact two of its bankers, Goldman Sachs and Chase.

Because of the fury in the US Congress and public, over the September 1998 Federal Reserve decision to arrange a public bank rescue of LTCM, to avoid meltdown of the global financial system, Alan Greenspan has decided to pursue a far more concealed strategy of "crisis management." Greenspan fears that if there is a disaster in financial institutions' gold carry trade, the hyper-fragile financial markets, especially the US stock markets, would plunge. This, in turn, would drive the price of gold up, into the range of $400 or beyond, and would likely trigger a stampede by foreign investors out of the US dollar. To prevent a dollar free-fall, Greenspan would be forced to impose a sharp rise in US interest rates, which would guarantee a collapse of the US stock bubble.

The Fed's efforts are being quietly supported by Treasury Secretary Larry Summers, who fears any market crash now would finally destroy the Presidential ambitions of Al Gore and with it, Summers' plans to be confirmed as Gore's Treasury Secretary, or perhaps Fed chairman."

Lyndon LaRouche


So the gold price fell through $300 So what!

The bottom line that we have to remember is why it is up here in the first place, and exactly what there is out there that might suddenly turn it round again. My personal estimate (and hope, for my own career prospects!) is that gold will finish 1999 with a bang, not a whimper. I have been trying to not listen to the bearish droning and whining about the gold price for the last two weeks - as most of it is coming from self-interested bullion dealers and even gold mining companies, for one major reason: risk.

The gold price's move north of $300 caused a lot of problems in an industry self-absorbed and fatalistic, used to big contangoes and hedging as a means to profiteering in a bear market, and gold mining as a sideshow. The hedge books of companies in some cases were bigger than their market caps, and represented big unrealized potential gains at $250 gold, should the management be brainy enough to take the money and run. The simple fact is that these hedge books are still there, and I can think of at least five companies that have sold TEN times their yearly production (can you believe a gold company would be that bearish on its core commodity that it would give away production for ten years???) - only expose themselves to serious financial risk in the case of one of those hundred-year events, a gold price explosion.

What a bunch of turkeys.

My own opinion is not worth much, but I am vehemently anti-hedging. And the endless bull - management has been feeding shareholders about how safe these hedge books are - is making me feel cheated out of performance from a sector that I had written off for a lot of this year. Consequently my recommendations for good situations is limited to those with new projects (exploration companies in some cases), and to producers that haven't sold the family jewels already.

The gold price has dipped below $300/oz on light volume selling - and the usual crap from US-friendly central banks helping out beleaguered bullion dealers - and gold companies from a very tight spot (this time the Kuwaitis).

The facts driving this market at present are still the same. And I am getting pretty bullish on the gold price, and particularly bullish on some of the smaller situations that have been knocked down to bargain prices again - and in some cases trade lower than they did before the gold price rise! (e.g. Viceroy at $1.25!!!). If you are a chartist, gold has come back and filled the gap it made during its rise to $340 on that mad morning when a hedge fund covered. At $300 it is testing solid support and I believe a lot of gold companies are opportunistically looking for a chance to cover hedges, many of which involve options struck at $300. You have to remember some key facts as to why the price is as high as it is:

1) World demand is approx. 4500 tonnes per year vis-a-vis production of 2500-3000 tonnes

2) Physical demand is up 20% this year, mainly from Asian buying when the gold price tested $260.

3) Approximately 10000 tonnes has been lent out into the market to finance hedge books, many of which are unprofitable and present credit and financial risk to counterparties.

4) Counterparties (bullion & lending banks) have worn derivative debacles in Yen, bonds, swaps and copper in the last two years, mostly from hedge funds getting caught.

5) hedge funds are short to the tune of 3000 tonnes, uncovered by any production or reasonable way of covering positions, mostly through options.

6) The gold lease rates normally trade at 0.5% for 12 months. They spiked to 10% for a week, causing pain everywhere when option books started blowing up and the precious "contango" ie the premium of future prices to spot deteriorated. They still remain above 1.5%-2% and mark the new status of gold as a commodity in short supply.

7) Gold traded down to $250 because of aggressive short selling by producers, bullion banks, and hedge funds looking to make a buck from a bear market without considering the risks.

8) The marginal cost per ounce of increasing production globally is approximately $270. This represents a cutoff level where gold companies usually make a loss from extra production. This is especially true in old orebodies in Australia and South Africa. And for all the announcements you see of Barricks' Pierina producing at sub-$100, there are four projects out there with unprofitable production that have to be seriously looked at for future viability.

9) Exploration budgets are one-third or less than what they were two years ago. New ounces are not being discovered faster than they are used, and many mines have been high-grading to maintain profitability in a falling gold price (another one of the things I loathe in companies!!)

10) The announcement of the European Central Banks decision to curtail new sales, and most importantly lending will effectively limit new hedging (where can they borrow the gold from????) and actively discourage renewal of old hedges as contangoes evaporate and the bottom line reason, the profit, disappears.

11) The US economy has finally acknowledged that inflation is alive and well (implied by bond yields of 6.40%) and interest rate hikes are on the way. The US dollar is under serious pressure from other world currencies (the euro and the yen for what its worth!) due to its mushrooming deficit and the huge amount of credit creation from good old Mr. Greenspan. Gold has been shown time and time again to be a hedge against US dollar weakness.

This is why I am bullish and this is why I don't care that the gold price is under $300 again. I believe there are a lot of Ashantis out there, and most of the them will not be disclosed until we get another spike in gold -- which I believe is not too far off.

Look for a base around $295, then another event (such as a falling Dow, a hedge book explosion, a credit default, the announcement by the Swiss that they wont sell etc etc) to set it off and running. If you are a chartist, you will recognize a flag pattern and consolidation formation in the last month or so, signifying a volatility explosion in the not-too-distant future. I believe the direction of this explosion will be up, for the reasons listed.

Basically there is too much random uncertainly out there right now to not be bullish gold - stocks are volatile, bonds keep falling, the US dollar keeps weakening,Y2K is alive and well, and the world is looking increasingly like it is sick and tired of the US dollar being the only alternative. Many Asians were upset by the attitude of the US to their plight when Asia crashed, and the Europeans were mortified when their brand new currency lost 20% in its first quarter. There are big moves going on behind the scenes and I am plugged into only some of them. I have heard the following rumors:

1) The Europeans agreed to stop lending gold to prevent further loss in the value of their reserves. The resulting volatility explosion was a planned event meant to further undermine the US dollar and cause headaches for Wall Street banks and hedge funds that had been actively shorting the euro.

2) George Soros had been plugged into the above and was a massive long gold player and still holds a big position, with full intent to squeeze some competitors (e.g. Tiger) shortly.

3) The Saudis have been huge buyers (I can confirm this is a fact - don't know why though) and are involved in the Euro thing as a repeat of their huge win in silver in the 1970s (see Bunker Hunt's squeeze). etc etc etc I am trying to illustrate that the market is pretty complicated and the gold price is like a window on to the credit flows of the world. It has been used as a funding mechanism by hedge funds (massive shorting to buy bonds) and a profit centre for bullion banks and gold producers. The smart in-crowd made stacks on the way down and are giving some of it back on the way up - I am not shedding too many tears.

Hopefully, you now feel a little more comfortable about holding gold companies in your portfolio and you should see gains in the gold price before year end (at the very least, as a Y2K spike.)

P.S. Patience!!! The gold price will base soon and move north FAST.

30 October 1999

Anonymous Author


You brain-dead trolls are gonna be SOL!

-- Andy (2000EOD@prodigy.net), October 31, 1999.

Thanks, Andy.

Like most small-timers, I don't have the depth of understanding in the global markets to either agree or disagree with you. But I do appreciate your answer and your effort.

I just thought that the activity of the last four hours was somewhat extreme, and maybe I had missed something.

By the way, MVI has reminded me of my true wealth by his posting on the FRL thread. I'm going now to sit with my sons for a few minutes before the day ends. I only hope such good fortune finds you as well, my friend.

-- Lon Frank (lgal@exp.net), October 31, 1999.

Thanks Lon,

just remember - the bastards are on a loser and they will move heaven and earth to avoid going bankrupt - the next weeks will be extremely volatile - they cannot turn the tide back however, y2k will finish them off if nothing else does.

-- Andy (2000EOD@prodigy.net), October 31, 1999.

I see Mr. Cut & Paste is at it again. Go Andy! Go get a life.

-- Cut & Paste (the@$$.hole), October 31, 1999.

I'm glad that you find me so entertaining as you pop up like a little prairie dog and read every single thing I post.


Just what I wanted to do - educate the uncouth...

Resistance is futile... :)

-- Andy (2000EOD@prodigy.net), October 31, 1999.

Date: Sun Oct 31 1999 23:15



Copyright ) 1999 Gambler/Kitco Inc. All rights reserved

Yes, gold lovers, it's true. They're for sale! I want to do my small part in helping out the desperate shorts to cover. So spread the word to any gold shorts you may know of. Let all of those mega-short Australian producers know they're for sale, too!

As posted last summer, my goal was to accumulate atleast 100 one ounce gold eagles prior to BOE's second auction on Sept. 21st. My purchases began last spring and accelerated into July ending just prior to the auction for an average purchase price of $274.

Now, what standard of fair value shall I use to determine the sale price of my 127 1oz gold coins? Because gold is valued in US dollars, perhaps I should base its fair value on the current US trade deficit. Can we agree on an approximate annual 300 BILLION give or take a few bones? Let's see, there's atleast a US$ trillion or so out there in foreign hands from the cummulative trade deficit that will come back soon as the dollar continues to decline in value and interest rates continue to rise. ( Reminds me of late 60's when Europe had all those greenbacks! ) The U.S. claims to have about 260 million ounces or so in its coffers. Assuming this hasn't been loaned out already, we have ( 1oz=$300 ) 260*300=78,000 million or 78 billion in gold which is roughly ( 300 billion / 78 billion = .26 ) or 3 months worth of gold.

But since we have atleast a trillion out in foreign hands, that equates to 1 trillion/260 million ounces=3,846 per ounce gold. Should I sell my 127 coins for a total of 127 * 3,846 = $488,442 ? Nah, that's change for chumps.

Okay, forget about the trade debt, then how about if I base fair value for my gold on US Money Supply. M-1, M-2, M-3?

Well, M-1 lemme see chere: 1.2 trillion / 260 million = $4,615 per ounce. Nah, as much as I want to help those saps, it's still chump! M-2 seechere: 4.6 trill / 260 mill = $17,692 per ounce. hmmm 127x17,692 = $2,246,884. Well, I must admit that's a little closer to what I had in mind. But, well you know, I love my gold and all so let's consider US government debt at about 5.6 trillion - no better yet let's use M-3 coming in about 6.2 trillion.

6.2 trill/260 mill = $23,846 per ounce! That equates to a grand total of US$3,028,442.

Now, all things being fair and equal, this would be a fair price to sell IF there wasn't a huge annual gold deficit in addition to all the forward sales! Well some figures suggest anywhere from a 100 to a 150 tonnes per month. Okay, Mr. Gold Short, I'll give you the benefit of the doubt, we'll use 1,200 tonnes per year as our deficit. So I'm going to have to assess you an additional premium and mark up fair value from wholesale to retail, let's see that comes to:

3,028,442 x 3 = $9,085,326!

= $71,538 per ounce

-- Andy (2000EOD@prodigy.net), October 31, 1999.

Wow - another intelligent post from Andy, repeated in a later thread because it's so clever. Keep taking the medication! Or are you just back from the pub early tonight?

-- Keep (taking@the.medication), November 01, 1999.

I see we have another annonymous troll with NO sense of humour...

-- Andy (2000EOD@prodigy.net), November 01, 1999.

Andy, not sure why you manage to get so many britches in knots, I just hope you keep doing so :-) Come by the FRL now and then and add some Brit humour - I miss it.

-- T the C (tricia_canuck@hotmail.com), November 01, 1999.

OK T I suppose I qualify :)

-- Andy (2000EOD@prodigy.net), November 01, 1999.

Here's a joke for keeptakingthemedicine to brighten up his humourless trolling day..

Blonde & brunette friends are walking down the street and pass a flower shop where the brunette happens to see her boyfriend buying flowers. She sighs and says, "Oh, crap,my boyfriend is buying me flowers again.....for no reason." The blonde looks quizzically at her and says, "What's the big deal, don't you like getting flowers?" The brunette says, "Oh sure.....but he always has expectations after getting me flowers, and I just don't feel like spending the next three days on my back with my legs in the air." The blonde says, "Don't you have a vase?"

-- Andy (2000EOD@prodigy.net), November 01, 1999.


Andy, you gotta post these under FRL or you'll have the poor moderators scratching their heads over where to file these threads - humour or finance. :-D

-- Tricia the Canuck (tricia_Canuck@hotmail.com), November 01, 1999.

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