SW Richmond

Winmill: Don't Be Surprised By $2,400/oz Gold

I want to emphasize the seminal nature of the Barrick capitulation. Barrick had been effectively short millions of ounces for years at ridiculous low prices, suppressing the market's price. More than any other recent events, their decision to close their shorts and get out of the way of the train headed their way, along with India's decision to buy 200 tonnes of IMF gold at over $1100.00 an ounce, raised the awareness of the gold situation among mainstream investors.

The goldbugs have been all over the gold situation for years, but now mainstream money managers are waking up. The interview points out the near-microscopic nature of the gold and silver markets. When serious institutional money enters these markets any little guy who doesn't already have some will be locked out by price. This thing is only beginning. The mania phase is a long way off.

Buy gold and silver and take delivery while you still can.

"This is not a drill."

Why Gold Is Losing Its Shine

"As a result, gold ETFs such as SPDR Gold Trust (GLD) may fall as much as 50% over the next few months..."

dude, omg.

Even the new koolaid-drinking Paul Volcker had this to say just a few days ago:

"Volcker agreed with economists who say the expansion of the Fed’s balance sheet, to more than $2.2 trillion as of last week, might pose an inflation danger at some point."

“The inflation problem, which should be a real threat for the future, is not right on the doorstep,” he said. “But two or three years from now that may be the critical problem, how that’s handled. Because, given what the Federal Reserve has been doing, it’s going to be harder to retrace their steps, so to speak, than it ordinarily would be.”

The Fed is not finished at $2.2 Trillion. We are headed for $6 Trillion IMO. The Fed, by backstopping everything it views as "systemic", stands astride the entire global financial system. They have painted themselves into a corner, because they believed they had no choice; had they done nothing, the system would have collapsed and central banking would have been publicly revealed as the impotent fraud that it is.

There is probably no point in getting into the 'inflation/deflation' arguments, but maybe you could tell me what happens to the buying power of dollars when the Fed prints this many and then can't back out?

BTW, absent significant inflation, I view this stock market rally as unsustainable. It's the P/E thing.

Are We More Like 1932 - or 1923?

Physical gold has no counterparty risk, and it cannot be used to create derivative products that are used against you. Precious metals investors should indulge in physical.

Did the ECB Save Comex from Gold Default? (Part 2)

Mr Goodman,

The government and the Federal Reserve now have a direct hand in every aspect of our economy. Though SA is an economics site, it must be obvious to all that any discussion of economic outlook or trends must start and end with politics and likely government actions. That is a horrible and unacceptable reality which we must correct.

The nationalization of the economy is nearly complete. Taxpayer calls to their "elected officials" are either completely ignored or rendered meaningless by illegal Fed circumvention. If Congress won't approve it, the Fed will merely create another lending facility and fund it with new money which ultimately becomes a liability to the taxpayers.

Regarding gold market manipulation: there are a few major possibilities I can see from where I sit. The one that makes the most sense to me is sovereign-backed manipulation for mutual benefit. Anyone who's been paying attention can now plainly see the Leviathan alignment / alliance of big money and big politics (Wall Street and Washington). Big players in the paper / derivative markets could easily push the tiny PM markets around as long as they knew they were backed by the central bank and its printing presses. Potential losses don't matter when TARP money isn't audited, or any other of the monstrous alphabet-facilities. If they win, great for them, and if not, there's always tomorrow and more taxpayer money. This would simply be another example of the same "privatization of profits, socialization of losses" that we have already seen elsewhere.

I think it is unwise to dismiss the manipulation as merely profit-motivated. So many authors and commentators are not well versed in the political motives of central banking and fiat currency. History is replete with examples waiting for the reader to find. Under "normal" circumstances, the most expensive thing any government does is prosecute a war; the second most expensive is placating the masses with bread and circuses (Social Security, Medicare, welfare, AFDC, SSI, NASA, etc etc). These endeavors can be paid for by taxes and/or by inflating the currency. Government borrowing merely means deferring the payment of taxes until "later". A central bank and an inflatable fiat currency play vital and irreplaceable roles in the maintenance of empire and the placation of the masses.

Under crisis conditions such as now central banking makes it possible to foist massive debt upon the backs of the taxpaying producer class against their will and without their consent.

The solution to the gold manipulation is to take delivery and empty the exchanges. This process will of course be met by increasingly difficult delivery terms; as gold supplies dwindle rule changes will be incrementally implemented to make it appear that the exchanges still function without delivering on all contracts held for delivery. Monthly delivery limits, market participant "standing" rules, and of course encumbrances on existing large known gold stocks will all be used to suppress the price. Anything is possible when you can make the rules as you go and you have effectively stifled dissent. This government, central bank and Wall Street have already clearly demonstrated their willingness to lie, cheat and steal, and out in the open for all to see. They know the system is totally co-opted and there's little to nothing we can do about it.

Except complain, and continue to demand delivery. This is at last being done by big private money finally starting to chase gold. It will be a long battle. As far as I am concerned this IS Jim Sinclair's "battle royale at $1,000.00".

I am sending faxes to your list of congresspeople.

Barrick Gold Nails the Hedge

"Stuck with the gold".

lolz!


On Feb 27 09:35 PM Midas360 wrote:

> Your post screams "SHORT." It never makes sense for miners to outpace
> gold spot. The price of miners relative to gold spot screams "bargain."
>
>
> If gold continues going higher, miners will eventually follow. <br/>
>
> Let's take a more macro look at gold and the U.S. dollar.
>
> What is the one thing that the economy, government, markets, financial
> system is lacking? Confidence.
>
> What is a currency that isn't backed by a physical commodity (i.e.
> gold, silver,etc)? Fiat Money System.
>
> In a fiat money system, the value of money is based on Confidence.
>
>
> What happens when all "Confidence" in money is lost? We enter what
> is called the "terminal stage of a fiat currency." The stage is called
> Hyper-Inflation.
>
> "Gold has replaced every fiat currency for the past 3000 years."
>
>
> The reason why the U.S. dollar is trending up with gold is because
> countries have lost faith in their currencies. They are exchanging
> their currency for U.S. dollars. This will be temporary at best.
>
>
> Imagine what is going to happen when the world loses confidence in
> the U.S. dollar? The dollar will devalue and gold will rise even
> higher.
>
> Here's the kicker. What happens to ALL those gold bullion investors
> holding $1500, $2000, $2500 per ounce gold? They can't exchange it
> for worthless dollars, right??? They are going to be stuck with
> the gold.
>
> It's a vicious cycle.
>

Barrick Gold Nails the Hedge

WOW, I am really confused.

From your article:
"Since Barrick does not hedge its gold, one would expect to see its stock performance closely mirror that of spot gold - at least to some degree. And usually, it has."

Barrick doesn't hedge? It's been my understanding that Barrick has the second largest hedge book on earth, after Anglogold Ashanti.

Check out this report (pdf warning):
www.gfms.co.uk/Market%...

"The largest activity came, once again, from the holders of the two largest hedge positions, Barrick Gold and AngloGold Ashanti."


And now, from the earnings call you cite in your article (did you read it?), Barrick officers are repeatedly assailed about their hedge book; their answer seems to me to boil down to "we're gonna worry about it later." Are they talking about the 9.5 million ounces Barrick hedged at $325 an ounce mentioned in this 2007 article:
www.reuters.com/articl...
"Barrick's hedge book has 9.5 mln oz gold at $325/oz"


The earnings call:

"Greg Barnes – TD Newcrest

Okay. Just a quick question to Aaron. What’s your view on the hedge, Barrick’s hedge, the 9.5 million ounces? If your view is that gold price could go to $2,000 just an example, what do you want to do with it?

Aaron Regent

Well, I think the hedge -- let me maybe start by saying, you know, the policy with respect to gold hedging is not to do any more gold hedging. And I think it would be -- we prefer that and we will closely manage their hedge book over time. I think that what we will do is we will manage it in a prudent fashion. And to the extent that we want to do something more aggressive that takes off (inaudible) capacity and we have to balance off that option versus other potential opportunities for the company. So I think I’d say it’s something that is managed and looked at quite carefully.

Greg Barnes – TD Newcrest

So you would weigh it off against -- in terms of paying it down or buying it back, I guess you would weigh it off against investment in Pascua Lama or assume your other development projects is how you would look at it?

Aaron Regent

I think so. At the end of the day, it’s a capital allocation decision. And so we have to look at -- if we deploy capital against the book, we deploy the capital somewhere else, what’s going to create most value for the organization. So I think that’s the thought process that we have to continually look at and review."

"Heather Douglas – Thomas Weisel Partners

Okay. And I have a follow-up question on the hedge -- on the hedge book. As it stands with your current agreements with your various counterparties, when do you have to start delivering into the book?

Jamie Sokalsky

Well, Heather, it’s Jamie again. The agreements provide for generally around ten years before the termination date. And so while we have allocated them to the projects, they are still subject to the very strong, very favorable terms that we have negotiated in the past on these agreements. And so we do not have to start delivering. We have the ability to deliver any time within that largely ten-year time horizon for the bulk of the contracts. So it’s at our option within that time period under these committed agreements. Having said that, we’ve allocated them against the projects. And as those projects come into production, we’ve allocated them in the years from 2012 onward as the initial protection for our project financing that we are anticipating for that portfolio of projects."

"Tanya Jakusconek – National Bank Financial

Okay. And you had mentioned that on the project development the feasibility studies you were expensing so far. I was just trying to get a better idea for what then is coming through in terms of these book values. And then just lastly on your hedge book, just to make sure that your counterparties, you still have 20 of them, Jamie?

Jamie Sokalsky

There are 17 counterparties that we have positions with, Tanya.

Tanya Jakusconek – National Bank Financial

And no one has more than 10% of your hedge book?

Jamie Sokalsky

We allocated some ounces after December 31 to another counterparty. So one has 13% of the ounces mark-to-market, and none of the others have more than 10%.

Tanya Jakusconek – National Bank Financial

Okay. And then just lastly, none of the counterparties have basically asked for the right to start delivering?

Jamie Sokalsky

No, the -- what -- where we are is, we have, as you know, the ability to deliver any time within that time period of the ten years I talked about earlier. We have this evergreen feature in the contract. So if the counterparties do not notify us that the contracts get extended for or the agreements get extended for another year, during 2008 three of the counterparties indicated that the agreements -- they weren’t going to extend it for another year. So those agreements are now around nine-year type facilities.

Tanya Jakusconek – National Bank Financial

Okay. So three of them have come back and said, okay, we want to start delivery nine years from now?

Jamie Sokalsky

Currently that’s the termination agreement of the -- termination date of the agreement. That’s right. And 14 continued to extend for a further year."


Barrick seems to have millions of ounces of gold hedged at $325 an ounce, not exactly a winning position with gold north of $900.00. Is the author even aware of this? Are we looking at the same company?

Profiting From Bernanke's Super-Fed and Obama's Newer Deal

Very thorough review of our current situation and the Fed's balance sheet. Bernanke clearly wants to achieve inflation; I agree also that the money that is currently sequestered will be pushed into the system once Treasury has done much of its funding. I expect this to happen once the Obama stimulus plan is in place and stimulus money has begun to flow. They will not shove the money into the system until the coordinated monetary/fiscal plans are ready to go.

Ultimately, of course, this recovery plan is about 'belief'. The starting gun will be fired by a massive PR campaign on national news programs, especially on weekends when worker bees can absorb it, talking heads all talking it up incessantly, smiles all around, lots of use of the words 'hope' and 'future'. Naysayers will not be invited.

I think your targets for gold and silver are achievable.

Barrick Gold: The Upside

If Barrick could get its hedge book straightened out it would be an OK company.

www.mineweb.com/minewe...

"Global hedging has fallen 10.3 Moz in the first nine months of 2008, but it is likely that full year dehedging will still be in our forecast range of 10-12 Moz as Q4 08 dehedging should slow sharply. In 2009 this slowdown will continue, as AngloGold Ashanti will have finished their dehedging programme, and together with Barrick they account for all but 4-5 Moz of global hedging. Nevertheless we expect further modest dehedging, with perhaps 1 Moz a quarter. However it is almost impossible to predict turning points, and the possibility of both much higher and much lower dehedging - or even an increase in hedging, cannot be discounted."

How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II

To All Gold Bashers:

Let's not confuse "commodity prices" with "dollar-denominated commodity prices." The unique aspect of the current situation is that the USD is the world's reserve currency and (currently) serves as a price gauge for oil etc. The pressure on the greenback is astronomical. Each mini-crisis we have seen (November Libor Lockup, Bear Stearns, Fannie/Freddie) have caused an observable crush of the dollar in real time until government intervened. If you are buying things will dollars, or holding assets in dollars, your future is dim, as the government is running out of ammo. USDX has been on life support since November. The coming wave of bank failures will kill it dead.

Was 70's "Stagflation" a dress rehearsal for an "Inflationary Depression"? Ask the British is they enjoyed their displacement of Sterling as the world's reserve. What events transpired during that transition?

Does the US have a unique opportunity as a technological leader? Absolutely. Will our brilliant political leaders get out of the way and let us take advantage of it? What do you think? And if it happens, who will own the companies that do it? Us? Or the SWF's?

Either the market is free, or it isn't. If decisions could be made in an environment free of regulatory cronyism we could thrive. US Government has become to large too allow genuine competition, which includes failure. A lost decade it is then.

At least.