SW Richmond

Long-Term Gold Bull - And Proud to Admit It

MHFT,

You forgot to tell us about Barrick's hedgebook; please allow me to take care of that for you. Did you catch the earnings call? Perhaps they're not such a well-run company after all.
seekingalpha.com/artic...

How does the 800,000 ounces of production over five years compare to the 9,000,000 ounces they are hedged short, having promised it at $325.00?

Let's see, 9,000,000 ounces at a net loss of $600.00 per ounce. They should work for the Treasury.

www.reuters.com/articl...

See my comment previously on Barrick:
seekingalpha.com/autho...

Here's a quote from the earnings call cited in that comment:

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."


On May 20 11:56 AM Mad Hedge Fund Trader wrote:

> Barrick Gold (seekingalpha.com/symbo...) snared approval
> for its Pascua-Lama adventure after Chile and Argentina signed a
> tax treaty on how to treat the mine’s profits. When completed, the
> $3 billion, 13,000 foot high project will be one of the world’s great
> engineering achievements, extracting a forecast 800,000 ounces of
> gold and 35 million ounces of silver in the first five years. This
> will raise the company’s production by 10% at a time when precious
> metals are getting increasingly hard to find. Just another reason
> to buy one of the world’s best managed companies producing the most
> sought after product.

What Is Going On With Gold?

paultaut,

I think you are wrong to focus on the deflationary pressures you point out. It's not those that I fear, it is the Fed's response to them. I am not the only one who is afraid; as I pointed out just above, the Chinese and the Gulf States seem anxious to denominate their trade in something other than dollars.

What Is Going On With Gold?

This article about the new Gulf Coast Currency is also very interesting:
tyo.ca/islambank.commu...

Especially this line: "Once established, the GCC leadership may decide to invoice their hydrocarbon sales in the new common currency, moving away from the current dollar pricing system."

What Is Going On With Gold?

One must HAVE Yuan to settle trades in Yuan. This means Yuan must begin to circulate globally. Very interesting.


On Jan 08 01:28 PM bosun.j wrote:

> China just began settling international trade in Yuan. As you know
> the Chinese never do anything on a "trial basis". China's longterm
> goal is to break American hegemony. I'm glad they are. It's well
> past time somebody did! China will be the world superpower in my
> lifetime.

What Is Going On With Gold?

What backs a fiat currency? Why is it valuable and worth holding? The US Dollar is in fact a zero coupon short term debt instrument issued by the Federal Reserve; that is why it is called a "Federal Reserve Note" (notes are debt, in case you forgot). As such it is as much an investment as it is a currency. If the things you are about to read are news to you, then you are a foolish investor who doesn't understand his investments.

According to this article: www.todaysfinancialnew...

Schiff puts it in plain terms: "Paper dollars are technically Federal Reserve Notes, which means they are liabilities of the Fed. When it puts newly minted notes into circulation it does so by buying assets, usually U.S. treasuries, which it then holds on its balance sheet to offset that liability. By swapping treasuries for mortgages, the Fed effectively alters the compilation of its balance sheet and the backing of its notes."

If you then look at the chart presented here:
www.frbatlanta.org/eco...
you can see that the quality of the securities backing your fiat FRN's has been drastically reduced over the course of this crisis, since the Fed has loaned out (swapped) its Treasuries in exchange for mortgage-backed securities in an effort to prop up the quality of the balance sheet of member banks. It has probably engaged in these swaps at face value (otherwise they wouldn't have had the desired effect), trading a $Billion in Treasuries for a $Billion in MBS or other junk "for which there currently is no market".

If you wish to place your life savings in a debt instrument currency that is ultimately backed by the ability of a landscaping employee in California to pay off his $600,000 mortgage, be my guest. The fact that our fiat doesn't suck as bad as anyone else's fiat should provide you sufficient comfort to be able to sleep at night.

All other things being equal, cash is a good hold in a depression. But we now have an activist Fed who has taken the bit in its teeth and run out of the ring. Dollar bulls should watch this recent Bloomberg interview with Bill Poole:
www.bloomberg.com/avp/...

Pay special attention to the part where he says:"The Fed has been encouraging the bond market to think the Fed is going to be in there supporting Treasury Bond yields. That can't be because the implications of that commitment are too simply horrendous to think about."