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Newmont Mining Corporation Message Board

  • CXPowell CXPowell Jan 30, 2004 11:31 PM Flag

    Zeno, you've missed a lot

    GATA indeed has been documenting the contrast
    between gold producer dehedging and the
    increase in gold lending by central banks.
    GATA consultant Reg Howe wrote a major
    research paper about the issue in December.
    Here's the GATA dispatch about it:

    11:40a Saturday, December 20, 2003

    Dear Friend of GATA and Gold:

    GATA consultant Reg Howe has inspected the books of
    the Bank for International Settlements, the Commodity
    Futures Trading Commission, the U.S. Office of the
    Comptroller of the Currency, and other financial
    authorities for his new analytical essay, "Gold
    Derivatives: Hitting the Iceberg."

    Howe's major conclusions:

    "That producer hedge book reductions have had little
    if any impact on total gold derivatives reported by
    the BIS suggests, as does the absolute data itself,
    that producer hedging never accounted for much more
    than the very visible tip of a gold derivatives
    iceberg consisting in major part of transactions
    related to the gold carry trade, which never could
    have grown to the size implied by the BIS data
    without the active support of the G-10 central

    "Clearing house rules require that losses to trading
    accounts be posted each day at settlement. Losses of
    the size incurred by the commercial gold shorts over
    the past few months beg two tough questions: What risk
    management system would allow losses of this magnitude
    to accrue without mandating the closure of losing
    positions? And are the central banks, directly or
    indirectly, assuming the burden of these losses?....

    "While gold derivatives reported by the BIS declined
    slightly in this year's first half, the gold
    derivatives of U.S. commercial banks, including J.P
    Morgan Chase, rose in the second and third quarters
    by nearly 1,000 tonnes. These increases, which came
    at the same time that the commercial shorts on the
    COMEX were raising their open positions to record
    levels notwithstanding eye-popping mark-to-market
    losses, lend further support to the hypothesis that
    the commercial shorts consist primarily of bullion
    banks with both heavy exposure to the gold carry
    trade and substantial official support."

    Together with GATA consultant Mike Bolser's recent
    study, "Government Intervention: Gold and Long-Term
    Interest Rates," which can be found here --

    -- this research documents how central banks are
    struggling to defeat free markets and deceive the
    world about international economic policies and
    conditions. This is essentially totalitarian
    and unjust and thus is likely to have a bad end.

    Howe concludes:

    "The gold community has prospered more than most
    over the past year. And having endured years of
    oppression by government, not to mention ridicule
    by establishment figures of all stripes and colors,
    gold bugs have earned the right to enjoy their
    good fortune. But real gold bugs are not
    profiteers. They are freedom fighters. For them,
    securing their own financial survival and that of
    their families is important but not sufficient, for
    they dream of a world in which gold is again the
    international monetary num�raire and where all
    peoples and nations meet on a level economic
    playing field characterized by free markets and
    an absence of malignant government intervention.

    You can find Howe's "Gold Derivatives: Hitting the
    Iceberg" at his Golden Sextant Internet site here:

    If you read nothing about markets over the next year
    besides these works of Bolser and Howe,

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