Thursday, September 10, 2009

Is Barrick responsible for gold at $1,000?

Bespoke recently asked the question: Did Barrick jinx gold again?

Now we have the answer and it doesn't look pretty. Barrick's de-hedging program may have actually driven up the gold price with its buying, according to this report [emphasis mine]:

Dehedging by the world's largest gold producer, Barrick Gold Corp. (ABX), has been the driving force behind gold's move above $1,000 a troy ounce this week, a price level analysts say is unsustainable.

Barrick said late Tuesday that it will close its gold hedges at a total cost of $1.9 billion over the next 12-months...

"We have more buying to do," the Barrick spokesman said.

India's gold market, which is one of the largest sources of physical gold demand, is showing signs of lukewarm demand. What's more, I posted a few days ago that the US bond market could be poised for a rally. Could this rally in gold be the final capitulation of the bond bears (and conversely the gold bulls)?

I remain a long-term commodity bull, but nothing goes straight up. For the gold bugs who want to send me hate mail, I refer you to this.


FIFO said...

I really enjoy the content of your blog comments and paper from the Quest funds. You are so spot on.

No disagreement here once ABX is complete with their dehedging process gold prices are likely to retreat perhaps in a large way since the herd is now in a speculative mode again and gold has been a relative underperformer.

The biggest factor that can alter that prediction is if the money supply data or velocity gets out of balance.

Which comes to my question, where can one find timely data for money supply and/or velocity. Wouldn't being armed with this information make the investment process less humbling?

Cam Hui, CFA said...

You can find data on MZM here:

...and the broader reconstructed M3 here: