-Caveat Lector- <A HREF="http://www.ctrl.org/"> </A> -Cui Bono?- from; http://www.aci.net/kalliste/ Click Here: <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Gold Market Bank of England Gold Auction Set for Today Where to place your bid. SAN FRANCISCO (CBS.MW) -- Spring is in the air, and that means another large gold auction. On Tuesday, by 12:15 p.m. London time, the world -- and the 18 or so gold investors in the world who care -- will know just how much demand there was for the Bank of England's auction of 25 tons of gold bars. See the gold auction announcement. Consider this piece a backgrounder on the dullest metal in the world: gold. After reading this, you might want to join those 18 gold investors who believe that bullion will become one of the coming decade's most profitable investments. Or you might want to shrug and walk away. The Bank of England's auction has big gold bars, between 350 and 430 ounces each. The Tuesday auction is the fifth and last in a series of British gold auctions this fiscal year. One of these British auctions last year was so oversubscribed by gold companies and other buyers, the price of gold popped. As high as $327 an ounce. That was then. See previous StockWatch on gold's rally. This is now. Gold is back below $290 an ounce. Central bank sales of gold are a deep psychological factor influencing the price of gold. The British Treasury has already said it will sell another 150 tons of gold in fiscal year 2000-2001, starting later this spring. Central banks around the world have about 20,000 tons of the metal in their vaults. The Bank of England's regular auctions are the highest profile of these sales -- and demand for the gold is a barometer of whether the metal might stage a rare rally. Who can blame these central banks? Gold is a lame reserve these days, right? It just sits there. The gold leasing rates that central banks reap when they lend their gold are paltry. Gold doesn't go up like a biotechnology stock. Or the London Stock Exchange's techMARK Index of high-flying computer stocks. The United Kingdom's bankers hope to reduce Britain's gold reserves to about 300 tons from about 700 or so tons. Last September, when 15 of Britain's European neighbors vowed not to sell any reserves, beyond the 2,000 tons they already had announced, for five years, gold prices surged. Briefly. France, Germany and Italy each have higher gold reserve levels than Britain's Treasury. The Dutch Central Bank recently announced plans to sell 300 tons of gold in the next five years. And so on. Also hurting the price of gold, which Monday sat at about $288 an ounce in New York futures trading (GC=JO: news, msgs), is net selling of borrowed gold. So-called forward hedging by large gold producers boosts the world's total supply by about 10 percent. See our futures contracts page. Gold producers, of course, forward-hedge to lock in a higher price for the rocks they are pulling out of the ground. Yet by hedging their production with futures contracts or put options -- or selling covered call options -- they are driving the price of gold into the ground. For Tuesday's gold auction to raise eyebrows -- as it did last September-- demand has to be off the meter. Let's look at the last auction -- Jan. 25. The price of gold on that day rose $1.50 an ounce in London after the Bank of England said its sale of 25 tons of gold had been 4.3 times oversubscribed. At the time, the central bank said it had received applications to buy as many as 3,451,200 ounces even as it sold just more than 800,000 ounces, or 25 tons. On Tuesday, gold producers -- the large ones like Placer Dome (PDG: news, msgs), Newmont Mining (NEM: news, msgs), Gold Fields in South Africa (GOLD: news, msgs), Barrick Gold (ABX: news, msgs), Rio Tinto and Anglogold Ltd. (AU: news, msgs) -- all must step up to the plate and bid for these giant gold bars. In size. Otherwise, gold on Tuesday, after 12:30 p.m. or so London time, will be a dull story. Chris Thompson, chairman of Gold Fields in South Africa, second-largest gold producer in the world, recently told me he expects a huge gold rally. Sometime soon. Of course, Thompson and other gold executives are paid to talk up the price of their metal. One sign they are putting their money where there mouths are: On Monday, Joseph Gutnick, an Australian mining magnate, said he wanted to raise $500 million to scoop up depressed natural-resources companies. Gutnick recently established the Capital Growth Resources Fund in the tax-sheltered Cayman Islands to look for stakes in gold and other metals. Thompson -- and others in the industry like Gutnick -- clearly are prepared to stop their forward-hedging of the metal and search for metallic bargains. Many large gold producers are using hedging strategies only when they must guarantee bank financing for the purchase of a mine, or a piece of land, or another gold company. That bodes well for gold, especially as economies in Asia, a traditional buyer of the metal for jewelry and investment, rebound this year. Read the interview with Gold Fields. Now, all that the gold producers have to do is show up at Tuesday's Bank of England auction and demand eight times what's on the auction block. Or more. Then, Tuesday won't be so dull after all. If you're interested in placing a bid -- the minimum is 400 ounces -- just click on this Web site: www.hm-treasury.gov.uk. And cross your fingers. CBS Market Watch, March 20, 2000 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. 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