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Fed governor says funny things affecting gold
7:10p EST Tuesday, February 15, 2000
Dear Friend of GATA and Gold:
Here's another delightful surprise: Thom Calandra,
columnist for CBSMarketWatch.com, dispatched this
ode to gold today. Mainstream press support for gold
Please post this as seems useful.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
GOLD IS POISED FOR GREATNESS
By Thom Calandra
February 15, 2000
SAN FRANCISCO (CBS.MW) -- I'm collecting people.
People who believe in gold. Companies too.
Right now, there are 17 people in the world who believe
in the once-precious metal. Last week there were 12.
If you are one of the same 17 people who believed -- 20
months ago -- that oil prices would surpass $30 a
barrel, then you have to believe in gold.
Jay Taylor believes in gold. He's the president of
Placer Dome (PDG), a large gold-mining company in
Canada. Placer Dome is stopping its forward sale of
Forward sales of gold are crushing the metal. That's
when a gold mining company freaks out about the falling
price of the metal. So it borrows gold, then sells the
stuff to lock in a good price.
The net selling of borrowed gold around the world -- by
the metal's producers -- is a joke. What if the oil
ministers at OPEC never got their act together and kept
jamming all that crude down the pipelines of the
world's economies? Do you think oil would be staging a
sustained rally? See our futures contracts page.
Placer Dome just came out and said it won't hedge gold
any more. It's about time. Net selling of borrowed
gold, which trades for about $308 an ounce, boosts the
world's total supply by about 10 percent. Add in
central banks selling gold -- the banks have about
20,000 tons of the metal in their vaults -- and voila:
gold is a stick-in-the-mud.
Gold has been a stick-in-the-mud for more than a
decade. That's all about to change.
Up to this point, net selling of gold has been how gold
companies got extra money -- by lending their gold and
collecting an interest rate payment. It's not enough
that demand for gold jewelry, especially from places
like India and China, is exceeding production. The big
gold-mining companies have had to play hedging games
and leasing games to keep their shareholders happy.
That's like a computer chip company flooding the market
for semiconductors. And then leasing the chips to boot!
If I owned Intel, and its financial officers were
engaging in that kind of activity, I'd bail.
Placer Dome is a believer. It will stop selling forward
about 2 million ounces of gold. Others, like Barrick
Gold (ABX), are also starting to come around. The
halting of hedging will do more to boost shareholders'
net worth than derivative games in the futures markets.
That's because in a day, or a week, or a month, or a
year, something will spark the price of gold. It may be
political turmoil in Germany. Or social strife in
Austria. Perhaps the collapse of the global currency
system as we know it. Maybe even $40-a-barrel oil. See
The spark may even be an inflation shock later this
week when Washington releases its consumer and producer
prices. See our economic preview.
But believe me. It will happen. And when it does, gold
mining stocks could leave Internet stocks in the dust.
I believe that. I really do.