Gold Price About To Be Manipulated . F. T. Article

[Realistbear]

http://www.ft.com/cms/s/0/3756f6ac-a08f-11...?nclick_check=1

Hedging loses its lustre for gold

By Javier Blas in London

Published: September 13 2009 19:26 | Last updated: September 13 2009 19:26

The gold industry’s legacy of forward sales is set to all but disappear by next year following the decision by the largest gold miner to buy back its hedges.

The size of the industry’s hedge book is set to drop to a residual of less than 200 tonnes by the end of 2010, the lowest in almost 25 years, according to industry estimates.

The reduction is a 95 per cent drop from 3,000 tonnes a decade ago.

The mining hedge book is important for gold prices. Bullion rose above $1,000 a troy ounce last week as investors sought refuge from dollar weakness.

When miners sell forward their production, they help push down prices. In 1999, their hedge book blew up to more than a year of mine output, flooding the market. Buying back the hedges since then has contributed to higher gold prices. As miners complete the buying back by late 2010, the hedge book will be a neutral force.

Miners sold forward their production to ensure a floor price, secure a stable cash flow and raise finance. But as gold prices have steadily increased from $250 in 1999 to more than $1,000 an ounce last week, the incentive has gone.

Barrick Gold, the Canadian-based miner, said last week that it would spend $2.9bn to buy back most of its hedge book, leaving AngloGold Ashanti, the third largest gold miner, as the only remaining top miner with significant forward sales.

Consultants and bankers believe the hedge book is unlikely to drop further beyond 150-200 tonnes because a residual amount of forward selling would be necessary for some miners to raise finance for projects.

John Reade, precious metals strategist at UBS in London, said Barrick’s move, “like the bell that rings as cyclists start their final lap, marks the beginning of the end of the global gold miner hedge bookâ€.

Barrick said it had decided to buy back its forward sales because of “an increasingly positive outlook on the gold priceâ€. It added: “Global monetary and fiscal reflation will be necessary for years to come, resulting in an increased risk of higher inflation and a future negative impact on the value of global currencies.â€

Mr Reade said that once Barrick’s buy-back was completed it “will place increasing pressure on AngloGold to follow suitâ€.

Might be time to sell? Market maniupluation usually spells disaster as you cannot beat the market. Look what Gordon tried to do with house prices.

[The Masked Tulip]

Telegraph has a similar article.

Gold = bubble IMPO.

Oh sh*t, this will set 'them' off.

[rp08]

umm this article is bullish for gold.. it means producers wont flood the market with forward sales...

[Realistbear]

umm this article is bullish for gold.. it means producers wont flood the market with forward sales...

EA sort of bullishness?

One way bet stuff......................

[quibble]

umm this article is bullish for gold.. it means producers wont flood the market with forward sales...

Indeed. A complete misinterpretation of hedging. I thought RB was supposed to be some kind of gold price guru?

[aardvark]

this is extremely bullish for gold if it happens.

[Realistbear]

Indeed. A complete misinterpretation of hedging. I thought RB was supposed to be some kind of gold price guru?

Gold sceptic more like. I bought gold a long time ago in the form of sovereigns and dumped them in about 1980 before the great gold crash. I got near the peak (c. $800) which, if translated into today's value, would be around $2236.79. A shockingly poor investment if held over that period.

This latest manipulation ploy is designed to get the masses interested and I think Warren Buffett's rule might be the wisest--when the herd buy its sell signal.

I agree its a "bullish" article which is why I think it is may be tiome to sell--its too bullish.

Edited September 14, 2009 by Realistbear

[ccc]

This should make it rather interesting for those holding gold mining shares. They will shoot up and down like a yoyo.

[Minos]

Gold sceptic more like. I bought gold a long time ago in the form of sovereigns and dumped them in about 1980 before the great gold crash. I got near the peak (c. $800) which, if translated into today's value, would be around $2236.79. A shockingly poor investment if held over that period.

This leatest manipulation ploy is designed to get the masses interested and I think Warren Buffett's rule might be the wisest--when the herd buy its sell signal.

I agree its a "bullish" arcule which is why I think it is may be tiome to sell--its too bullish.

So what do you reckon RB? Below $300 by Christmas?

[Realistbear]

So what do you reckon RB? Below $300 by Christmas?

Range bound perhaps. Seems to hit $1k and drop. Almsot like people are bubble shy. If deflation hits gold will drop below $300. Chances for deflation? High IMO.

[quibble]

Range bound perhaps. Seems to hit $1k and drop. Almsot like people are bubble shy. If deflation hits gold will drop below $300. Chances for deflation? High IMO.

Wow! You're much more of a deflationist than even Prechter. Do you have a timescale for your $300 target?

[General Congreve]

umm this article is bullish for gold.. it means producers wont flood the market with forward sales...

You are indeed right and the OP has completely got the wrong end of the stick. It is also nothing to do with price manipulation.

This is bullish for gold. Gold hedging takes place where a gold producer sells it's un-mined stock forward to the market at today's price, this is an insurance policy against prices falling in the future when the gold is actually mined and ready for physical sale. Barrick Gold are stopping this hedging and by stopping sales of all their un-mined gold, as they believe it will be worth more tomorrow, when it is extracted, than it is today.

Therefore, the article is bullish for gold. Of course, Barrick Gold may be wrong and the market will be going down from here.

Personally I have every faith they Barrick are right. There is something nasty lurking out there in the financial system of this world, and our goverments have only temporarily satiated it by cutting off the taxpayers legs and throwing it a bone. They'll probably cut off the arms next, but eventually they'll run out of bits to chop off and the monster will go on the rampage. I'll be keeping my gold for when that happens thank you very much. It'll mean I'll probably be one of a select few left in my town with any real money to my name. Looking forward to it.

[aardvark]

Wow! You're much more of a deflationist than even Prechter. Do you have a timescale for your $300 target?

how about..... never?

[Minos]

Range bound perhaps. Seems to hit $1k and drop. Almsot like people are bubble shy. If deflation hits gold will drop below $300. Chances for deflation? High IMO.

I'll wager you a box of 25 Cohiba Esplendidos that we don't see sub $300 between now and 2020. Fancy those apples?

[sharpe]

Range bound perhaps. Seems to hit $1k and drop. Almsot like people are bubble shy. If deflation hits gold will drop below $300. Chances for deflation? High IMO.

Put your money where your mouth is?

I would take that bet. $10 for every $ below $300 an ounce to you, for $10 above $1000 to me settlement date 31st Dec 2009

[Democorruptcy]

In another article about this it said the way Barrick had done business had cost them 500%.

mmm.... so a company that can hardly be classed as shrewd are changing their business model. Have they now employed some sharp minds or are they shutting the stable door after the horse has bolted?

[wren]

Below we list the popular consensus about gold that we heard over the years since 2000, prefaced by the cumulative average gold price that year.

What they said, when they said it, and the gold price that year:

1. Gold $271: "Gold will continue to decline as it has for 20 years to $200 or lower."

2. Gold $275: "Gold is certain to continue its decline to $200 or lower due to deflation following the collapse of the stock market bubble." (That was the year we backed up the truck.)

3. Gold $310: "Despite a modest recent rise due to increased gold demand driven by investors�€™ fear associated with the 9/11 attacks, gold will soon resume its decline to $200 or lower once the fear subsides."

4. Gold $363: "The rise in the gold price since 2001 is due to a combination of temporary factors, such as investors�€™ fears about oil and inflation related to the War in Iraq and a weak dollar. Soon the positive outcome of the war will be clear, the dollar will strengthen, and gold demand will drop off, pushing prices back down toward $200."

5. Gold $410: "Economic recovery is pushing up gold demand and prices. The Treasury department has restated its strong dollar policy. Gold will soon lose its luster and fall back to $300."

6. Gold $445: "Gold prices increased only slightly this year over last year, indicating a topping in the gold price. Next year gold prices will fall to $300 or lower."

7. Gold $604: "The spike in the price of gold this year is due to short term dollar weakness. Look for the dollar to rally and gold to decline back to more normal levels below $400 starting next year."

8. Gold $695: "Gold traded mostly sideways over the last year, indicating a topping in the gold price. Look for gold to decline to well under $500 next year."

9. Gold $872: Early in the year, "Gold is participating in a bubble in commodities. When the commodity bubble pops, gold will fall more than 50% along with oil and other commodities." Later in the year: "Gold has crashed to $716 along with stocks and commodities and will continue to decline to $500 next year."

10. Gold $924: "The gold price reflects widespread concern about the financial system in the wake of the global financial crisis. As the system steadies, the gold price will drift down to under $700."

What does each popular consensus position about gold have in common? One, wrong every time. Two, every few years the prediction of the following year's price "bottom" was increased in ratchet-like fashion. Waiting to buy based on the consensus has been a mistake eight years running.

http://www.itulip.com/forums/showthread.ph...1715#post121715

[Godley]

You are indeed right and the OP has completely got the wrong end of the stick. It is also nothing to do with price manipulation.

This is bullish for gold. Gold hedging takes place where a gold producer sells it's un-mined stock forward to the market at today's price, this is an insurance policy against prices falling in the future when the gold is actually mined and ready for physical sale. Barrick Gold are stopping this hedging and by stopping sales of all their un-mined gold, as they believe it will be worth more tomorrow, when it is extracted, than it is today.

Therefore, the article is bullish for gold. Of course, Barrick Gold may be wrong and the market will be going down from here.

Personally I have every faith they Barrick are right. There is something nasty lurking out there in the financial system of this world, and our goverments have only temporarily satiated it by cutting off the taxpayers legs and throwing it a bone. They'll probably cut off the arms next, but eventually they'll run out of bits to chop off and the monster will go on the rampage. I'll be keeping my gold for when that happens thank you very much. It'll mean I'll probably be one of a select few left in my town with any real money to my name. Looking forward to it.

No it won't it will mean you have a worthless bit of paper that you will use to flap in peoples faces, despratley trying to convince people you own the gold. Except the computer keeps saying 'noooooo' because the government confiscated it.

You would have some credence if you had taken physical delivery (which I doubt) but even then they are worthless bars of metal because the people you need to sell it to and the system you need to use to realise its value is run by the authorities and therefore it will be 'CONFISCATED'.

You could though sit on it for years and wait for the doom to have been sorted out and then you will have either starved because you couldn't trade it meaningfully or its now lost its value because no fecker wants it.

Gold as a hedge against financial armageddon is a fools gold for joe muggins, it is only a store of wealth for bankers and nation states. Trade it as an investment but to say it is protection against systematic failure is as daft as borrowing 6 x your salary to buy a house.

[tomwatkins]

No it won't it will mean you have a worthless bit of paper that you will use to flap in peoples faces, despratley trying to convince people you own the gold. Except the computer keeps saying 'noooooo' because the government confiscated it.

You would have some credence if you had taken physical delivery (which I doubt) but even then they are worthless bars of metal because the people you need to sell it to and the system you need to use to realise its value is run by the authorities and therefore it will be 'CONFISCATED'.

You could though sit on it for years and wait for the doom to have been sorted out and then you will have either starved because you couldn't trade it meaningfully or its now lost its value because no fecker wants it.

Gold as a hedge against financial armageddon is a fools gold for joe muggins, it is only a store of wealth for bankers and nation states. Trade it as an investment but to say it is protection against systematic failure is as daft as borrowing 6 x your salary to buy a house.

Give me a wharehouse full of soup and baked beans anyday.

[Toto deVeer]

No it won't it will mean you have a worthless bit of paper that you will use to flap in peoples faces, despratley trying to convince people you own the gold. Except the computer keeps saying 'noooooo' because the government confiscated it.

You would have some credence if you had taken physical delivery (which I doubt) but even then they are worthless bars of metal because the people you need to sell it to and the system you need to use to realise its value is run by the authorities and therefore it will be 'CONFISCATED'.

You could though sit on it for years and wait for the doom to have been sorted out and then you will have either starved because you couldn't trade it meaningfully or its now lost its value because no fecker wants it.

Gold as a hedge against financial armageddon is a fools gold for joe muggins, it is only a store of wealth for bankers and nation states. Trade it as an investment but to say it is protection against systematic failure is as daft as borrowing 6 x your salary to buy a house.

Indeed. If Armageddon hits, I will eat my bread whilst you can eat your gold.

[dr ray]

Indeed. A complete misinterpretation of hedging. I thought RB was supposed to be some kind of gold price guru?

Agree

Barrick now think they forward sold their gold at too low a price and are buying back their hedge.

Barrick got it wrong before. On the other hand they are the worlds biggest gold producers and I am a private individual with no knowledge of the market (except I have learnt to believe no one). I reckon they know more about the gold market than I do and they putting their chips on it going higher..

[dr ray]

Indeed. If Armageddon hits, I will eat my bread whilst you can eat your gold.

You need to read what happened in Argentina when it went from a first world to a third world state. Society broke down and the currency worthless.

Pretty soon entrepreneurs started up and a market of sorts started to function. If you had something to trade you could buy fuel and food.

The currency was US dollars and gold. Fancy gold jewelry and rare coins just fetched someway below bullion price but they still have a value.

Maybe US dollars will still have a value if and when the UK goes the same way but I prefer not to take the risk.

[quibble]

Indeed. If Armageddon hits, I will eat my bread whilst you can eat your gold.

Bread lasts for what - 3 days max? The closest to the armageddon scenario in recent European history was probably Jewish people fleeing Hitler. The ones that preserved their wealth - and transferred it to non-hellhole countries - held easily transportable gold, not warehouses of beans. Ideally you'd have both.

[General Congreve]

No it won't it will mean you have a worthless bit of paper that you will use to flap in peoples faces, despratley trying to convince people you own the gold. Except the computer keeps saying 'noooooo' because the government confiscated it.

You would have some credence if you had taken physical delivery (which I doubt) but even then they are worthless bars of metal because the people you need to sell it to and the system you need to use to realise its value is run by the authorities and therefore it will be 'CONFISCATED'.

You could though sit on it for years and wait for the doom to have been sorted out and then you will have either starved because you couldn't trade it meaningfully or its now lost its value because no fecker wants it.

Gold as a hedge against financial armageddon is a fools gold for joe muggins, it is only a store of wealth for bankers and nation states. Trade it as an investment but to say it is protection against systematic failure is as daft as borrowing 6 x your salary to buy a house.

1. It was physical, not an ETF.

2. For the record my house was burgled and it was all stolen, it is now someone else's problem in terms of govt. confiscation.

3. Gold is currency. Barter died a long time ago. We live in a complex multi-threaded market where money is a necessity to trade all the goods we use in our modern lives efficiently. In the event of financial armageddon, there will still be food in the UK (just a bit less and therefore less fat birds, yippee!), but a currency will still be needed for transactions. Historically gold is the oldest and most trusted currency, show me a person who doesn't know it's value...

4. I worked in Zimbabwe for a while, I exchanged US dollars for Zim dollars at substantially above the official govt. rate on the black market to make my money go further. There was no shortage of black marketeers involved in the trade. I was happy doing that in Mugabe's brutal Zimbabwe, so why would trading in gold on a UK black market bother me? Not that I have it to trade, like I said, it was all stolen.

Edited September 14, 2009 by General Congreve

[General Congreve]

And to all these idiots who are arguing for the sake of arguing about rather having food than gold. Have you actually got months and months supplies of food?

I very much doubt you're putting your money where your mouth is. However, I bet you all own a fair bit of paper money don't you? Good luck with that.

For the record I am prepared with a month's worth of food so I can lock up and keep the wolf from the door in the event of a disease epidemic or the shops suddenly being temporarily empty for a bit. Like someone else said, food needs warehousing. Well the farmers can do that and I'd pay them in gold to buy some of their excess food (like people do with paper at the moment - it's a tried and tested system see!) - that's if my gold hadn't all been stolen of course.

Edited September 14, 2009 by General Congreve