Chancellor''s losses hit $6.6 billion as gold touches record high

Section:

By Ambrose Evans-Pritchard
The Telegraph, London
Saturday, May 13, 2006

http://www.telegraph.co.uk/money/main.jhtml?
xml=/money/2006/05/13/cncopp113.xml&sSheet=/money/2006/05/13/ixcityto
p.html

Thieves used to steal lead from church roofs. Now they raid railway
lines for copper.

The heavily-protected stretch of high-speed (TGV) track from Rheims
in northern France to Metz in the east has been targeted 12 times
this year by organised gangs who rip out the 5 millimeter stranded
copper cable from the overhead wires or dig up the buried cables
that run below.

It is worth the trouble too, as long as the electricity remains off,
with copper at a fresh record of $8,783 a tonne this week, up 170
percent over the past year. It closed at $8,460 yesterday, down
$159. Seven tonnes of metal have disappeared from the line.

The Marne Prefecture has called for extra gendarmes to patrol at
night, but the police are already overstretched dealing with an
epidemic of scrap-filching across France.

In Le Havre, the metal mafia recently brazenly hijacked two lorries
laden with 50 tonnes of nickel, a handsome haul with nickel now
nearing precious heights at $22,200 up $500 a tonne this week.

The metal is used in steel alloys and wired brassieres.

It is much the same in Belgium, where helicopters now police rail
lines running between Brussels and Charleroi to the south of the
capital, after 40 raids on the copper wires in the signalling
systems.

"You can't put copper on an open trailer any more, and insurance
premiums are shooting up," said Simon Paynton, head of the
International Wrought Copper Council.

"Fabricators have started to impose a security surcharge. Of course,
we have thieves every time there's a price spike, but we've never
had a spike like this before," he said.

Zinc, aluminium, copper, and nickel have all exploded to record
highs, driven by the industrial revolutions in China and India, with
help from property booms in the Anglo-Saxon world.

Airbus has just snapped up a 10-year supply of titanium at a cost of
$1.2 billion (640 million) to build its A380 and A350 jets, while
molybdenum, which is effective at hardening steel, is up eight-fold
on Chinese demand and fuel cell fever.

Behind it all is excess liquidity created by four years of easy
money from the world's central banks.

Hedge funds and investors flush with cash are now riding the futures
markets as never before.

Barclays Capital estimates that the big money brigade has invested
up to $120 billion in metals, energy, and, belatedly, food futures,
up from $6 billion in 1999.

The inflows are bidding prices beyond genuine demand.

"Speculators are buying metal that doesn't exist through a paper
market. It's not industry driving the price any longer," said Mr
Paynton.

Robin Bhar, a metals analyst at UBS, said there was clearly an
investor frenzy.

"People think they're going to make their millions in commodities --
that's the bottom line. And it's true that the world does seem to be
running out of copper," he said.

Fuelling the mania is a geological study by the US National Academy
of Scientists warning that mankind has already used up 26 percent of
all the copper ore ever likely to be found in the earth's crust. The
prospects for zinc are not much better.

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