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Barrick Gold Corp. and J.P. Morgan Chase & Co. Accused of Illegal Gold Market Manipulation
Press Release ^ | 18 December 2002 | Unknown

Posted on 12/18/2002 9:53:28 AM PST by LSUfan

An anti-trust lawsuit filed today accuses Barrick Gold Corp., Toronto, and J.P. Morgan Chase & Co., New York City, of "unlawfully combining to actively manipulate the price of gold" and making (US) $2 billion in short-selling profits by suppressing the price of gold at the expense of individual investors.

(Excerpt) Read more at savegold.com ...


TOPICS: Announcements; Breaking News; Business/Economy; Front Page News; News/Current Events
KEYWORDS: barrick; gold; goldbugsalert; goldfoilhatalert; jpmorganchase
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1 posted on 12/18/2002 9:53:28 AM PST by LSUfan
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To: LSUfan
Oh, God forbid anyone make a profit!
2 posted on 12/18/2002 9:56:27 AM PST by hchutch
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To: LSUfan
I figured this was coming! It all has to do with derivatives. Doesn't surprise me a bit!
3 posted on 12/18/2002 9:57:42 AM PST by Matchett-PI
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To: LSUfan
These are undoubtedly the parties most likely to be involved in gold manipulation. Barrick is famed for selling gold ahead massively, and Morgan is famed for its immense holdings of gold derivatives.

Whether the suit can succeed is another matter. I suspect that the Fed is involved as well, and that they may intervene in the same way that they did against the Hunt Brothers' silver holdings. As the old saying goes, you can't fight City Hall.
4 posted on 12/18/2002 9:59:21 AM PST by Cicero
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To: LSUfan
This is great news! Anyone holding physical ought to be pretty happy. Shine the light on those cockroaches.
5 posted on 12/18/2002 10:00:47 AM PST by Sangamon Kid
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To: arete; razorback-bert; rohry
Thought this might be of interest.
6 posted on 12/18/2002 10:03:12 AM PST by dtel
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To: LSUfan
From the article: "If gold had kept pace with inflation, the price today would be approximately $760 (per ounce)."

No need to read any further...this guy is a looney. If my stock portfolio had kept pace with inflation, I'd be retired!!
Welcome to the investment world and good luck on your court case. LOL!!
7 posted on 12/18/2002 10:20:04 AM PST by Cuttnhorse
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To: hchutch
The problem is that the bullion banks sell gold that doesn't exist. If everyone who had an option to buy the gold tried to cash in, the world financial markets would implode. Nothing wrong making a fair profit, but conspiring to keep the gold price low by selling gold that doesn't exist is unfair to those who are trying to sell gold they actually own.
8 posted on 12/18/2002 10:58:37 AM PST by BearCub
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To: Cuttnhorse
This case was already known to many goldbugs. I read about it several weeks ago. I doubt they will be successful, but the case will draw attention to the large short positions, which is bullish for gold. In the last few days, I have heard segments on Bloomberg, CNBC, and local AM radio that were moderately bullish on gold. The general public is starting to become aware of what goldbugs have known for the last 2 years.
9 posted on 12/18/2002 11:02:06 AM PST by Soren
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To: dtel
Thanks
10 posted on 12/18/2002 11:27:38 AM PST by razorback-bert
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To: hchutch
"Oh, God forbid anyone make a profit!"

Hey..I'm with you. Screw anybody....as long as their is a profit to be made.

11 posted on 12/18/2002 11:37:43 AM PST by hove
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To: hchutch
There is a better source on CBS MarketWatch. Here are some key paragraphs:

"The suit was filed by Blanchard and Company, Inc., New Orleans, the largest retail dealer in physical gold in the United States, and by Blanchard clients who bought gold bullion. Blanchard (www.blanchardonline.com) is paying the costs of the suit, which asks the Federal Court to terminate the trading agreements between Barrick and J.P. Morgan Chase and other, as yet unnamed, bullion banks. It also seeks the payment of treble damages to Blanchard's clients for the losses they have suffered as a result of Barrick's and J.P. Morgan Chase's unlawful price manipulation, anti-trust violations and unfair trade practices.

"Since the end of 1987, when the collaboration between Barrick and J.P. Morgan began, the growth of global income and wealth would have lifted the gold price to approximately $740 if the price had been able to respond to the normal laws of supply and demand," stated Blanchard's Chief Executive Officer, Donald W. Doyle, Jr. "If gold had kept pace with inflation, the price today would be approximately $760."

"The lawsuit claims that in the past five years Barrick and J.P. Morgan Chase injected millions of additional ounces of gold into the market - additions that were several times as great as the annual production of every gold mine in South Africa, the largest gold producing nation in the world. By using privately negotiated derivative contracts and concealing the addition of billions of dollars worth of (physical) gold with off-balance sheet accounting, Barrick was able to make it virtually impossible for gold analysts and investors to determine the size and the market impact of its trading positions.

"The same type of accounting maze that hid Enron's debts made it possible for Barrick to manipulate the price of gold without the checks and balances that come from public scrutiny. As a percentage of Barrick's total assets, its off-balance sheet assets make Enron look like a champion of full disclosure," said Doyle. "Is Barrick a gold mining company, or is it a hedge fund with a mine out back?"

"The suit alleges that J.P. Morgan Chase financed Barrick's repeated short selling with remarkably advantageous terms not available to others, including deferred repayments and no margin calls. Doyle said the short-sales scheme between the bank and Barrick appears to be the proverbial "money for nothing."

"Over the past five years, J.P. Morgan Chase loaned gold to Barrick at approximately 1.5 percent; sold the gold into the market and invested the dollar proceeds at approximately 6.5 percent; then paid both the proceeds from the sales and the 5 percent interest differential to Barrick whenever it repaid any of the borrowed gold. During a period when the price of gold dropped by more than 25%, Barrick's annual operating cash flow increased by more than 400%."

If the above proves to have merit, count on class action suits with there not being enough money in defendants control to pay all the claims. This may be also curtains for Alan Greenspan and several or more Treasury Secretaries, but not the present one.

12 posted on 12/18/2002 12:01:54 PM PST by shrinkermd
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To: Soren
Did you read this? Pure Garbage. Good luck.!! :)
13 posted on 12/18/2002 12:03:04 PM PST by Afronaut
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To: dtel; mountaineer
Thanks for the bump. GATA tried to sue these guys (along with The Fed, and a few other government and quasi-governmental agencies) but the case was thrown out because they didn't have "standing." These guys (a huge gold dealer) obviously has "standing."

I believe a Freeper with the screen name mountaineer was working a similiar case...
14 posted on 12/18/2002 12:06:58 PM PST by rohry
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To: shrinkermd
This may be also curtains for Alan Greenspan and several or more Treasury Secretaries, but not the present one.

Do you mean Rubin? If so, how so?
15 posted on 12/18/2002 12:16:05 PM PST by MamaLucci
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To: rohry
Thanks for the bump. I wrote a news story about the Reg Howe lawsuit several months ago, and have been planning to do a follow up. It looks like this is the time!
16 posted on 12/18/2002 12:20:29 PM PST by mountaineer
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To: mountaineer
"I wrote a news story about the Reg Howe lawsuit several months ago, and have been planning to do a follow up. It looks like this is the time!"

Better hurry! The word on the street is that the gold derivatives market blow up when gold gets to $348:


17 posted on 12/18/2002 12:53:49 PM PST by rohry
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To: Matchett-PI
You should read the self-serving press release (filed by the company that is suing the banks) before you respond.
18 posted on 12/18/2002 1:20:10 PM PST by berserker
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To: dtel
Yes, I'm glad to see that this situation is finally getting some attention.

Richard W.

19 posted on 12/18/2002 2:15:37 PM PST by arete
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To: arete
Gold is up 3.70 in overseas trading tonight.
20 posted on 12/18/2002 3:20:46 PM PST by shrinkermd
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To: d4now
ping
21 posted on 12/18/2002 3:25:11 PM PST by monkeyshine
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To: shrinkermd
"Is Barrick a gold mining company, or is it a hedge fund with a mine out back?"

I have been to several of Barrick's operations and they are well-run and low cost operations...producing between 6 million and 7 million ounces per year.

Anyone who thinks Barrick is a hedge fund with a mine out back is an idiot.

22 posted on 12/18/2002 3:25:32 PM PST by Cuttnhorse
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To: rohry
Better hurry! The word on the street is that the gold derivatives market blow up when gold gets to $348

The word on the street used to be that the gold derivatives market would blow up at $340. And before that, $330.

An ever-moving target...just the sort of thing to get the clueless to buy lots and lots of gold.

23 posted on 12/18/2002 3:28:38 PM PST by Poohbah
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To: joanie-f
flag
24 posted on 12/18/2002 3:31:10 PM PST by snopercod
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To: Poohbah
"The word on the street used to be that the gold derivatives market would blow up at $340. And before that, $330."

I guess that you are not paying attention. The fire is already raging in the plane and is working its way to the fuel tanks:



Your analysis is welcome...

By the way the chart is not up to date. The price of gold is currently $345. What is your dog in this fight?

25 posted on 12/18/2002 3:44:20 PM PST by rohry
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To: rohry
I guess that you are not paying attention.

Oh, I am paying attention.

I've been paying attention to these claims for years. Too bad you haven't.

So far, gold has popped through two price levels that would supposedly trigger a catastrophic meltdown of JP Morgan and the other investment banks.

So when is the catastrophe supposed to engulf JP Morgan?

26 posted on 12/18/2002 3:46:37 PM PST by Poohbah
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To: Poohbah
The word on the street used to be that the gold derivatives market would blow up at $340

How do you know that it isn't? If the POG stays at these levels for a couple of weeks, you are going to see a bunch of other financial problem coming to the surface. Just be happy that we are finally being set free and that the fiat dollar is going into the toilet where it belongs.

Richard W.

27 posted on 12/18/2002 3:46:44 PM PST by arete
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To: Poohbah
Pooh,

It's impossible to reason with the tinfoil hat types.
28 posted on 12/18/2002 3:49:01 PM PST by Cuttnhorse
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To: arete
How do you know that it isn't?

Because the people who hold the derivatives would cash in as soon as possible under your scenario.

If the POG stays at these levels for a couple of weeks, you are going to see a bunch of other financial problem coming to the surface.

Your ilk has been saying this for years.

Just be happy that we are finally being set free and that the fiat dollar is going into the toilet where it belongs.

Well, if you're right about that claim, your gold holdings will do you no good. You can't eat it, and you can at least use worthless Federal Reserve notes as toilet paper.

29 posted on 12/18/2002 3:50:38 PM PST by Poohbah
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To: Cuttnhorse
I know. But it's fun to yank their chains :o)
30 posted on 12/18/2002 3:51:04 PM PST by Poohbah
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To: Poohbah
You can yank my gold chain all you want. I'm making some very good money on this move. :-)
31 posted on 12/18/2002 3:55:09 PM PST by arete
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To: Poohbah
"I've been paying attention to these claims for years. Too bad you haven't."

And for years the claims were bogus. There was a bear market in gold and silver for 20 years. The smart people look for the bottom and buy. That bottom was put in during April 2001. I bought in June 2001. I am not a goldbug, I was totally invested in stocks (100%) until January 2000

The Dow fell about 35% from its peak to its low (10/9/2002). The bulls have been crowing that “the bottom has been reached and we are in a new bull market.” It has risen 15% (and currently declining) since its low.


The S&P 500 fell 45% from its peak to its low (10/9/2002). The bulls have been crowing that “the bottom has been reached and we are in a new bull market.” It has risen 15% (and currently declining) since its low.


Gold fell about 70% from its peak (Jan 1980) to its low ($253 in 7/1999). It has since risen over 30% since then. The bulls have been crowing that “the bottom has been reached and we are in a new bull market.” Which of these bulls is more likely to be right?


Again I ask, what dog are you betting on?
32 posted on 12/18/2002 3:56:48 PM PST by rohry
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To: Poohbah
"Because the people who hold the derivatives would cash in as soon as possible under your scenario."

And how, exactly, would that happen?

There are more (short) derivatives on gold than all the gold mines in the world produce in 7 years. Where are the shorts going to buy gold without raising the price to the stratosphere? Your understanding of what is happening seems to be lacking...
33 posted on 12/18/2002 4:01:46 PM PST by rohry
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To: Sangamon Kid
It's amusing how Blanchard pines for a "free market", yet resorts to government power to curtail activities which occurred in the free market. Why aren't Barrick and JPM part of the market? Does strategizing destroy the "normal" laws of supply and demand? Of course not! The free market is manipulation and strategic trading. The "pure and perfect competition" in those Econ 101 textbooks is a myth.
34 posted on 12/18/2002 4:03:07 PM PST by billybudd
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To: billybudd
"It's amusing how Blanchard pines for a "free market", yet resorts to government power to curtail activities which occurred in the free market."

Did you read the article? The gold market (like Enron's dealings) is not transparent. Private companies have been borrowing gold from the Treasury (or the Fed) and "leasing" it into the market to suppress the price...

How would you respond if your company made Ford automobiles and the government was buying Chevys and selling them at a huge dicount to force down the price of cars?
35 posted on 12/18/2002 4:13:29 PM PST by rohry
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To: arete
I am inclined to agree with you, arete; however, here is an excerpt as an alternative view from Yahoo.

"VANCOUVER -- News of an antitrust lawsuit being brought by U.S. retail gold dealer Blanchard & Co. against Barrick Gold Corp. and JP Morgan Chase & Co. is being dismissed by some equity analysts as a publicity gimmick.

"Shares of Barrick fell in Toronto and New York early Wednesday afternoon after Blanchard & Co. announced its legal action. Barrick recovered from an intraday low of C$23.46 to close at C$24.45, down 0.8%. The Toronto market's gold index was up 2.8%.

"The market impact you already saw," Barry Allan of Research Capital said, adding that he believes the stock market will come to view the lawsuit as opportunistic.

"Why now? Why now, if this has been going on for so long? It's only now that hedging has become unpopular," because the gold price is rising, Mr. Allen said. "It just strikes me as being very sensationalistic."

"As reported, Blanchard & Co. claims that the Toronto-based gold producer and JP Morgan teamed up to manipulate the price of gold. Blanchard, which deals in coins and gold bars, claims that the gold price should actually be at about US$ 740 an ounce -- or US$760 counting inflation -- if the market had been able to respond to the "normal laws of supply and demand."

"In a statement, Barrick called Blanchard's allegations "ludicrous" and " totally without merit."

"JP Morgan Chase hasn't commented on the lawsuit.

The failure of ABX not fall dramatically is alarming if the legal action has merit. I guess it is the same old story--you decide it's time to buy but you cannot buy unless someone else decides to sell. Your optimism is always counterbalance by someone else's pessimism. Ha.

36 posted on 12/18/2002 4:13:58 PM PST by shrinkermd
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To: rohry
There are more (short) derivatives on gold than all the gold mines in the world produce in 7 years. Where are the shorts going to buy gold without raising the price to the stratosphere?

Well, there's the point. Lots of short action out there. On the other side of each short derivative is someone who will profit from an INCREASE in price, and they'll make a LOT of money.

Believe me, the holders of long positions will cash in as soon as they can. ESPECIALLY if you're saying that there's far too much short action out there--because the holders of long positions will seek to turn their positions into cash before anyone else does, lest they be left holding an unsecured loan to an entity in bankruptcy court, so they're just going to race to be the first to pull the trigger.

37 posted on 12/18/2002 4:17:55 PM PST by Poohbah
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To: rohry
Again I ask, what dog are you betting on?

None of the above, actually.

It's just amusing as hell to read the GATA conspiracy theorists and their ever-moving target for when all hell breaks loose in the gold derivatives market.

That figure used to be $280 back in 1999. Now it's closing on $350. If gold keeps rising, I'm willing to bet that the "magical doomsday price" will stay just ahead of the actual price...because it allows outfits like Blanchard to keep shilling away.

38 posted on 12/18/2002 4:22:45 PM PST by Poohbah
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To: Poohbah
Because the people who hold the derivatives would cash in as soon as possible under your scenario.

Remember Enron? It's heads they win, tails you lose. If they lose, they hide the loses in off-balance sheet transactions. If those blow up, the counterparties take a bath. JPM and Citi are already in the hole on Enron's natural gas derivatives. They tried to pawn the loss off on the insurance companies but have failed in court. Eventually, the taxpayer will be on the hook. That's the "you lose" part.

Also look up Ashanti and Cambior. It's happened in the gold market before.

Well, if you're right about that claim, your gold holdings will do you no good. You can't eat it, and you can at least use worthless Federal Reserve notes as toilet paper.

I also store two year's worth of food and toilet paper, so no problem there :-)

Seriously, we don't need to see Argentina happen here to have a good trade in gold. And gold holdings do pay off in a rising gold market. Harmony yields 2.6% and has doubled in the last year.

39 posted on 12/18/2002 4:23:09 PM PST by larrysav
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To: Poohbah
Don't forget the $320, $315, $310 & $300 levels where JPM Chase was going under by trillions of dollars. They gold bugs will never learn. My own gut tells me I am better off investing greenbacks in Food and Bullets no matter how worthless they are because I will have move of a need for those items whengold become the main means of exchange again.
40 posted on 12/18/2002 4:27:12 PM PST by Woodman
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To: Poohbah
"Well, there's the point. Lots of short action out there. On the other side of each short derivative is someone who will profit from an INCREASE in price, and they'll make a LOT of money."

And you know this, how? The derivative market is non-tranparent (there are no reports on how the derivatives are structured). There are computer programs driving the buying and selling of derivatives, do you know what their buy and sell points are? Most of the contracts demand delivery of physical gold.

The gold that has been "borrowed" (actually sold) has to be bought on the (transparent) market. Where are they going to buy it to deliver to the "longs."

I seriously don't think that you know what ypu are talking about...
41 posted on 12/18/2002 4:27:26 PM PST by rohry
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To: Poohbah
Again I ask, what dog are you betting on?

"None of the above, actually."

So I've wasted my time conversing with someone that is invested in NOTHING! Unbelievable...

42 posted on 12/18/2002 4:31:34 PM PST by rohry
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To: shrinkermd
Funny thing is that I agree. I also think that the law suit is opportunistic and, "It just strikes me as being very sensationalistic."

No doubt a marketing ploy in my opinion, but it still will focus needed attention to some of the trading activities in the gold market and that can't be bad. Once in a while, you have to turn on the light just to see where the cock roaches are.

Richard W.

43 posted on 12/18/2002 4:31:45 PM PST by arete
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To: larrysav
Some support from Bill Murphy tonight (GATA):

"Today was a sight to behold. Right from the get-go, you could tell gold was going to roar. The cabal tried to take down gold all night and morning, but it was obvious they were not going to succeed. Yesterday’s dramatic sell-off then became a positive as today’s early action showed the shorts to be in big trouble. Sure enough, once again the smart money buying crowd stuck it to The Gold Cartel on the close.

"The cabal has now lost their last line of defense, that being $340 resistance. For the last two days, they gave it all they had to try and take gold down. THEY WERE WHIPPED! It is important to note that we still do not have any gaps to fill on the downside. We still do not have that upside break-away gap, followed by a buying panic in the US. That could come any day now. Word was sent my way today that option books are blowing up because of the sharp move up in the gold price. There is no telling what the gold price could do on the upside. That $10, $20, $30 up day could be at hand! Collectively, the shorts are on the hook for some 15,000 tonnes of gold. Mine supply is only 2500 tonnes per year and shrinking. How are they going to pay the loans back? Where are they going to get the gold? Only one way: gold must rise hundreds of dollars per ounce. Then, the women and peasants of the world will bring their scrap gold in jewelry form to market. What fun! The dummkopf, arrogant western bullion bankers need to be bailed out by the peasants of the world. Couldn’t happen to a nicer bunch of guys."

This fellow is a trifle on the conspiracy side of life like Bob Chapman, but they both have made me money. I note that James Dines has been bullish for some time and came out with three new recommendations. All three of these men are interesting and easy to read, and Dines is a master wordsmith and I subscribe to him as much for his intellectual meanderings as for his financial advice. No one should buy gold or gold stocks without looking at a number of good advisers.

44 posted on 12/18/2002 4:31:48 PM PST by shrinkermd
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To: rohry
And you know this, how?

Because that's how markets, transparent or not, work.

The derivative market is non-tranparent (there are no reports on how the derivatives are structured).

Interesting. You sound like a guy complaining about a lack of transparency when a private individual sells a firearm to another private individual.

There are computer programs driving the buying and selling of derivatives, do you know what their buy and sell points are?

You seem to be claiming that $348 is a magic number for some reason. Do you actually know the buy and sell points? Or are you merely BSing? I merely noted that various people have CLAIMED that the magic doomsday price was just around the corner for three years now.

I get a wee bit skeptical when doomsday is predicted over and over, yet somehow never comes.

Someone put up money saying that the price of gold was going to increase. They will collect when it is profitable to do so--and the alleged target figure for said profitability has gone up nearly 25% in the past three years.

Most of the contracts demand delivery of physical gold.

Fine. Then the holder of the "long" position gets delivery of the gold, and he can then turn it around and sell it on the market.

The gold that has been "borrowed" (actually sold) has to be bought on the (transparent) market. Where are they going to buy it to deliver to the "longs."

Like I said, the "longs" will simply demand cash on the barrel. If the short-seller can't buy to cover, he's f***ed. BTW, this happens all the time in the securities market.

I seriously don't think that you know what ypu are talking about...

Well, I disagree with you. I do know what I am talking about...and you most assuredly do NOT.

45 posted on 12/18/2002 4:36:41 PM PST by Poohbah
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To: shrinkermd
I don't listen to any of these hypsters but I have read the GATA stuff and it makes sense. Especially when viewed in light of the recent market action. The hedgers are seriously lagging the non-hedgers. ABX looks really sick (I sold at 22). JPM is down but I seriously doubt that gold derivatives will sink JPM.

Now, interest rate derivatives are another story. Watch out for that one when the bond market cracks up.

46 posted on 12/18/2002 4:38:06 PM PST by larrysav
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To: rohry
I have some bond funds right now, but that's it.

I have a very small amount of gold. But most of my precious metals investment is in copper-jacketed lead and brass.

47 posted on 12/18/2002 4:38:31 PM PST by Poohbah
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To: razorback-bert; rohry; arete
If the facile media do their usual sensationalistic coverage of this developing story, new retail interest in physical gold may push the dollar price of gold up sharply. Very sharply, indeed. In the context of a developing bull market in gold, this could help create a financial crisis for many major banks and brokerage firms, and the biggest ones, at that.

The financial catastrophe that could possibly ensue might move the Government to once again nationalize American's private bullion holdings.

Too many goldbugs seem to believe that if there is a buck to be made off the collapse of civilization, they will do it, and they'll be there to cash in. This is a species of 'bubble-think', the kind of irrational beliefs that destroyed so many folks in previous financial manias.

Prudence requires that one owns gold; it also requires that one admits to ignorance of the future.

I'm just happy to see my gold and silver positions move up in value. ;^)
48 posted on 12/18/2002 4:39:18 PM PST by headsonpikes
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To: headsonpikes
The financial catastrophe that could possibly ensue might move the Government to once again nationalize American's private bullion holdings.

That's what the lead and brass are for. However, the size of the gold market is so small, it is doubtful that a sharp rise in price would impact any large bank to the extent that they would fail. Even a sharp decline in the dollar that would be implied in a gold increase wouldn't fail the banks. In the short term, it would increase U.S. export competitiveness. In the long term, we all pay with inflation.

49 posted on 12/18/2002 4:49:35 PM PST by larrysav
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To: Poohbah
"Interesting. You sound like a guy complaining about a lack of transparency when a private individual sells a firearm to another private individual."

I am a BIG supporter of the 2nd amendment. You are clearly grasping at straws.

"I have some bond funds right now, but that's it."

About 55% of my investments are in (short term) bonds. They are going down big time. I am locked in, however.

"I have a very small amount of gold. But most of my precious metals investment is in copper-jacketed lead and brass."

My father and I load (and sell) ammo in our spare time. Both owning PMs and owning ammo are honorable activities, in my opinion.
50 posted on 12/18/2002 4:50:44 PM PST by rohry
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