Today, after the gold markets closed down, came the biggest news about gold that I have heard in many years.
To understand why, you need to be aware that for years, Barrick had been selling gold promises into the market at far lower prices, serving to hold down the price of gold. The promises were simple, forward hedges that gave Barrick cash today for gold to be delivered in the future.
Over time, Barrick repeated this trick enough times that it had forward-sold more than an entire year’s worth of production.
Also over time, more than one observer became uncomfortable with the idea that Barrick was inadvertently serving to suppress the price of gold by flooding the markets with their gold promises. Some even speculated that Barrick had an entirely too-close relationship with certain Wall Street banks which made obscene profits by shorting gold and profiting from weak gold prices.
At the time, this speculation seemed over-the-top, but after the level of theft, fraud, and insider trading done by Wall Street, exposed over the past year, these thoughts are no longer unthinkable. Quite the opposite.
At any rate, here’s the gigantic news of the day (hat tip to WB for the story and link):
Barrick to sell $3 billion in stock to buy back hedges
Tue Sep 8, 2009 6:57pm
TORONTO (Reuters) – Barrick Gold (ABX.TO) will issue $3 billion in stock to eliminate all of its fixed-price gold hedges and a portion of its floating hedges, taking a $5.6 billion hit to third-quarter earnings, the world’s top gold miner said on Tuesday.
by cat233