Gold and Silver Blog

In the Commodities Corner column of this weekend’s Barron’s, the topic is gold, and specifically the Washington Agreement. In September 1999, central banks agreed to limit gold sales and gold lending for five years. This has been good for gold investors. As you know, the central banks have huge stockpiles of gold, and if they all started dumping it onto the market, gold prices would tank.

The World Gold Council has an information page about the Washington Agreement.

The analysts interviewed for the Barron's article believe that the Washington Agreement will be extended. For example, analyst Andy Smith is against the agreement, but he says “Sadly, while good arguments can be made to get rid of it, the agreement is more likely to be extended or rolled over because it's easier that way and less controversial�

Let’s hope that the G7 ministers extend the agreement when they meet later this month, thereby removing this worry from the gold market.

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This has nothing to do with gold, but I want to use this soapbox to say that Dick Grasso’s $139.5 million of pay is simply outrageous (see for example Grasso grumbling grows in the NY Daily News). Running the New York Stock Exchange obviously pays a lot more money than I could ever hope to make from my investments in gold and silver stocks. Whatever he does, it isn’t worth that much money.

I hope that this latest outrage from Wall Street leads to honest open trading on ECNs such as the Island. Modern technology has eliminated the need for old fashioned exchanges like the NYSE.

There was a pullback in gold and silver prices today, along with stock prices of mining companies. On the Yahoo message boards, the Gold Cabal, the Plunge Protection Team, and Alan Greenspan were all blamed for this. One or two dissenting voices even blamed profit taking.

Coeur D’Alene’s (NYSE: CDE) new public offering has been priced at $3.40/per share (Coeur Announces Pricing of Public Offering). I know that many investors hate it when the companies they own dilute their stock, but in this case it’s good for the shareholders. Coeur D’Alene’s stock price is near its three year high right now, and it’s beneficial for the company to take advantage of that to de-leverage its balance sheet some more. Banks often have a much dimmer view of the benefits of investing in mining companies than do the shareholders, so it’s a good thing for Coeur D’Alene to not have to rely on loans in order to finance its operations. Coeur D’Alene has made quite a turn around from a year and a half ago when they were debt ridden and losing money. After the 20,635,000 share stock offering, Coeur D’Alene will be nearly debt free and should definitely be reporting nice profits with the current silver price.

It’s too bad that internet companies like Amazon.com (NASDAQ: AMZN) didn’t take advantage of their stratospheric stock prices in 1999 and early 2000 to de-leverage themselves. Now AMZN is stuck with over $2 billion of debt and the company is still losing money.

The gold anti-trust people are involved in another lawsuit against JP Morgan and Barrick Gold alleging a conspiracy to keep down the price of gold. This story was picked up by two Canadian newspapers during the last two days: National Post, The Age. It's funny how only two obscure Canadian newspapers have reported this story about a lawsuit in the United States, and no U.S. papers have picked up on it. This could mean either that the story isn't newsworthy, or that there is a big conspiracy that prevents it from being reported.

Their first lawsuit, filed in Boston, was dimissed in March 2002 because the plaintiff, Reg Howe, didn't have standing. I guess Reg Howe didn't take Federal Courts when he was in law school.

If the plaintiffs are allowed to get discovery, which looks likely, who knows what they might find? To quote the National Post, “The allegations have circulated on the Internet and in select circles for years, but have generally been dismissed as unsubstantiated claims from fanatical gold bugs.� The reporter for the National Post obviously has some doubts about the lawsuit's merits.

There's more strange DROOY stuff in the news (Curve Ball - Where are they now?). What hapenned to three ex-employees of DROOY who made accusations against the company? It seems that they are now all working for Roger Kebble or friends of Roger Kebble. This Kebble guy is a real nutcase. He recently hired some bogus accounting firm, Gobodo Forensic Services, to say that DROOY was nearly insolvent (DRD's Auditors Scotch Insolvency Claim).

DROOY's real auditors, KPMG, released a letter which said in part: "In our view as auditors of DRD who have recently concluded its annual review, DRD was a going concern as at 30 June 2003, and was in a position to discharge its obligations to its current creditors at that date, hence we had no difficulty in issuing an unqualified audit opinion on its financial statements for the year ended 30 June 2003.'' I trust KPMG a lot more than "Gobodo Forsensic Services" in the back pocket of Roger Kebble.

Why bother to invest in a company with all this weird kharma? Because of the million ounces of gold they mine each year, and their potential to significantly expand production if the price of gold increases.

Welcome to my new Gold and Silver Blog. This blog will contain frequent updates of interest to gold and silver investors, including links to other resources and my own personal insights. During our journey, we hope to eventually answer the following questions: (1) Will there be a big precious metals bull market to end all bull markets? (2) Is there really a conspiracy to keep down the price of gold? (3) Is JP Morgan involved in the conspiracy (assuming it even exists)? (4) Does Mahendra Sharma, who fashions himself the "Nostradamus of Africa", really have any psychic powers?