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Murphy''s ''Midas'' commentary for Oct. 31 posted in the clear at GoldSeek
7:57p ET Monday, October 31, 2005
Dear Friend of GATA and Gold:
The Reuters dispatch below seems to be the first news
service story that recognizes the importance of hedging
-- sales of borrowed gold -- in regard to Barrick Gold's
proposal to acquire Placer Dome. But the Reuters story
doesn't quite reach the insight about the proposal that
was offered tonight by GATA Chairman Bill Murphy in his
"Midas" commentary at LeMetropoleCafe.com and by Tan
Range Exploration CEO Jim Sinclair in his commentary at
his Internet site, JSMineset.com.
While Barrick's bid for Placer Dome is said to be
unsolicited or hostile, Placer Dome is, like Barrick, a
major hedger, except that it lacks what Barrick has called
its own "evergreen" gold hedging arrangements. That is,
Barrick has boasted of its ability to borrow virtually
unlimited amounts of gold inexpensively for 15-year terms
that can be renewed every year so that, in effect, the
gold never really has to be repaid.
Like Blanchard & Co., whose lawsuit in U.S. District Court
in New Orleans has charged Barrick with rigging the gold
market, GATA has surmised that Barrick's virtually infinite
supplies of gold come from central banks via Barrick's
bullion bank, J.P. Morgan Chase. (For who else but central
banks has that much gold to "lend"?) Indeed, seeking
dismissal of the Blanchard lawsuit, Barrick filed a motion
in court confirming as much -- claiming, in effect, that
it is the agent of the central banks in regulating the gold
price, and that, since the central banks have sovereign
immunity against suit, that immunity should extend to
Barrick itself as their agent:
http://www.lemetropolecafe.com/img2003/memoformotiontodis.pdf
If Barrick acquires Placer Dome, presumably Placer's
hedging liabilities will be covered by the "evergreen"
provisions of Barrick's hedging arrangements with the
central banks via Morgan Chase, and thus the danger of
a short squeeze against Placer's hedging will be
eliminated.
Like the Bank of England's series of gold sales begun
in 1999 and the Washington Agreement on Gold signed
by the European central banks that year and renewed
this year, Barrick's acquisition of Placer Dome can
be seen as part of a central bank scheme to rescue
all large private parties that are short gold, a
scheme accomplished at a heavy public cost -- the
discounted dishoarding of the various national
patrimonies.
If this indeed is the central bank scheme, it means
that the gold price is not likely to rise abruptly or
rapidly, as many gold bugs dream -- and, indeed, the
gold price has not done so. But it also would mean
that the central banks are attempting a controlled
retreat with gold, and a retreat that is not without
danger.
The five-year chart of the gold price that is
accessible on the link displayed halfway down the
right side of the home page at Kitco --
-- tends to confirm this. For the chart shows a rising
30-degree angle and an average annual gain for gold
of about 15 percent over five years.
As with everything else really important done by
central banking, no one is supposed to notice this,
for once the central banks' scheme is understood,
the market may become less cooperative with their
market rigging; the market may rediscover the only
sure thing: gold.
So GATA will continue to try to help people notice.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Barrick Bid Seen Bullish for Gold Price
By Zach Howard
Reuters
Monday, October 31, 2005
http://biz.yahoo.com/rb/051031/minerals_gold_barrick.html?.v=1
NEW YORK -- A potential deal combining Barrick Gold with Canadian
competitor Placer Dome may offer support to gold prices due to
increased de-hedging and it should not dramatically affect the
outlook for production, metals analysts said on Monday.
Gold sources felt that joining the two firms who have long used
forward sales and/or options to lock in prices of unmined gold would
probably mean a bit less hedging in the market.
The combined firm likely would have more cash flow and would better
be able to more aggressively roll out of the hedges they have, which
could lift gold's price, the analysts said.
"It could potentially have a small, short-term impact on gold,
depending on what they decide to do with the hedging within Placer
Dome," said Victor Flores, a mining analyst at HSBC in New York.
"That should be positive for prices because I don't think Placer
Dome has been very pro-active on the de-hedging front," said another
gold analyst, based in Canada, who declined to be named.
Hedging protects producers in times of low gold prices as they lock
in better prices for their metal, but it prevents those miners from
fully enjoying a rally if contracted prices are cheap relative to
current prices.
Barrick, recently the owner of the industry's biggest gold hedge
book, said Monday it began an unsolicited $9.2 billion bid for
Placer Dome -- historically also a large hedger -- in a deal that
would create the world's biggest gold miner.
The announcement was notable as gold holds near a recent 18-year
high due to strong investment and jewelry demand.
It also comes at a time when the industry is struggling with higher
exploration and mining expenditures, brought on by lofty energy
costs.
A successful takeover would boost Barrick -- already Canada's
biggest gold miner and the world's No. 3 -- ahead of U.S.-based
Newmont Mining Corp. and South Africa's AngloGold Ashanti Ltd.
(ANGJ.J) in world rankings. Placer is the world's No. 5.
Barrick said a deal with Placer Dome would produce 8.3 million to
8.4 million ounces of gold a year, and would mean spinning off a
sale of several mines to fellow miner Goldcorp.
One market watcher said the Barrick/Placer news was bullish for
gold, in part because it seemed to show Barrick was betting the
metal's price would remain strong.
Barrick offered $20.50 a share for Placer, a 24 percent premium over
the prior closing price in New York on Friday.
"With gold still around an 18-year high, Barrick offering a 24-
percent premium for Placer Dome is definitely a bullish indicator
that the price is going to continue to rise," said Emanuel Balarie,
senior market strategist at Wisdom Financial Inc. in Newport Beach,
California.
If the Barrick/Placer deal goes through, production plans of the two
miners probably would not be sharply affected by the consolidation,
however, the analysts said.
"It could mean a little bit of a slowdown of the expansion of growth
production because you'd have one management moving those projects
forward rather than two," said Jeffrey Christian, managing director
of precious metals consultant CPM Group. "But I'm not even sure that
you'd see that.
"I think those two companies have relatively like-minded management,
so my thinking would be that there would be little change -- less
change between those two companies than there would be with others,"
he said.
Last year, the world's sixth biggest producer, Harmony Gold,
launched a hostile takeover bid for rival Gold Fields but the offer
failed.
Traders said on Monday they initially thought gold might jump up on
the news, but fund selling later hit the market on concerns about it
being steeply overbought at current levels.
Benchmark gold futures in New York ultimately ended 1.7 percent
lower at $466.90 an ounce on Monday.
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RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
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NEWS AND ANALYSIS
Free sites:
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http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
http://www.goldpennystocks.com/
Subscription sites:
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http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
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WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
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178 West Service Road
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Toll Free:1-877-775-4826
Fax: 518-298-3457
and
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Dr. Fred I. Goldstein, Senior Broker
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The Moneychanger
Box 178
Westpoint, Tennessee 38486
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Franklin Sanders
1-888-218-9226, 931-766-6066
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