You are here

Bullion banks told to cover by month''s end, source says

Section: Daily Dispatches

10:26a ET Monday, May 14, 2001

Dear Friend of GATA and Gold:

Here's today's gold market commentary at, whose Internet site's
bulletin board has been a generous host to
GATA from our beginning. The USAGold daily
commentary is where many people start the
day's watch on the market.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *'s
daily gold market commentary
for Monday, May 14, 2001

a href=http://www.USAGold.com

Gold moved sideways in quiet early Monday trading
in New York. Both Asia and Europe were also quiet

The London Bullion Market Association released
their monthly turnover figures this morning and
they once again reflect the view expressed often
here that the gold carry trade -- which has
acted as a deterrent to higher gold prices over
the past several years -- continues to unwind.
LBMA April gold turnover was down a steep 12.5
percent. That could very well be the largest
drop since the LBMA started publishing its daily
volume figures. If nothing else it clearly
signals that something is changing, and perhaps
changing abruptly, in the gold lending business.

This has not been lost on gold investors the
world over. Bullion demand remains strong
internationally and Lipper reports over the
weekend that gold stocks have suddenly become
a hot item, in fact the best performing sector,
in the world of equities. Rising gold stocks
usually presage rising gold prices.

Salomon Smith Barney's Leann Baker seems to
think we are in for some changes in the gold
market. In a report released this morning
titled quot;Gold - A Discernible Shift, For the
Better, in Investor Sentiment,quot; she says:

quot;In our view, the higher lease rates suggest
that central banks are less willing to lend
gold at subpar rates, and some in fact appear
to be setting 'lease rate targets' below
which they will not lend. Moreover, we
understand that some major central banks
lenders are now lending further into the
future, in turn becoming less active in
responding to short-term lease rate
fluctuations. Lease rates have firmed despite
an apparent reduction in demand for borrowed
gold both by producers and by speculator short
sellers. Rising lease rates and declining
interest rates make it less likely that
producers stand ready to boost hedging
activity if gold proves able to successfully
penetrate $275 resistance, which bodes well
for a more sustained move higher at some point.quot;

Ms. Baker goes on to offer a gold price
estimate in the $275 to $325 range for the
rest of 2001 and 2002.