Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Barrick Gold Ripe for Bear Raid

Commodities / Gold & Silver 2009 Sep 17, 2009 - 01:36 PM GMT

By: Jim_Willie_CB


Diamond Rated - Best Financial Markets Analysis ArticleBurn, Baby, Burn !!! Could it be that one response to the Chinese shot across the bow of the corrupted and leaky USS Derivative ship at sea is the announcement that Barrick Gold to cover their entire hedge book… again? Maybe! They covered them all in 2007, didn’t they? They said they did! This is turning out to be an event every two years. Maybe in 2011 they will announce cover and closure of their entire hedge book again. Last time, the key words in the fine print were closure of all hedged gold positions from operating mines. That meant they were willing to lose billion$ in shareholder equity on all mines not yet open, but with ongoing gold price exposure. No wonder they installed a new CEO recently.

They have burned through over 20 years of profit in this hedge book strategy, useful for the USGovt but disastrous for shareholders. The ongoing dilution of their stock will continue for a few years more. The next big question is where will Barrick purchase the gold to fulfill the contracts and retire them with metal delivery. It looks like the open market. Maybe the source will be IMF gold bullion. Maybe they own a raft of StreetTracks GLD shares passed under the table from hedge funds. Their operations suffer greatly, from capital drained for balance sheet repair rather than mine development. They boast being a giant among miners, but their production given their equity is pathetically low. They remain a finance firm masquerading as a mining organization, and have finally been caught with their pants at their ankles.

Why the Barrick Gold (symbol: ABX) stock is not cut in half promptly is a mystery to me. They implicitly admit a grand lie from two years ago, with remaining grand hedge book exposure. Perhaps because it remains somewhat a sickly darling among institutions, which are probably either dumb as fence posts or bribed by simple lavish lunches and government back scratches. The Barrick news should be considered as a link in a chain of events likely to unfold in the next several months.

The conflict, labeled by me in the September Gold & Currency Report of the Hat Trick Letter as ‘Financial Trade War’ with China, is indeed significant, dangerous, and far reaching in its potential for conflict. In 2005 and 2006, my analysis pointed out that a severe trade war with China was likely within two to three years. It has been festering beneath the surface in the last year, and has begun to erupt in full glory. Obama seems every bit the Sinophile antagonist that Bush the Younger was. Well if truth be told, both presidents merely follow the orders given to them by Goldman Sachs, errrr the USDept Treasury. Poking sticks at creditor eyes is not a fruitful practice, as the United States will soon learn. The end result will be a steady push into the Third World and a reduced role in global banking. Maybe Beijing icons will purchase some high end homes in the Hamptons. Plenty of ‘Lehman’ and ‘Madoff’ properties are up for sale, as a contact from Long Island reports. Those are the names given by real estate brokers, for properties held by victims willing to unload them.


The Gold price has advanced finally beyond the 1000 mark. The silver price shows much more gusto, strength, and resilience, as it easily swept past the 17 mark. The Gold price rise is much like a powerful centipede climbing a wall. It has many legs (bidders). The Gold price benefits tremendously from the ‘Beijing Put’ as the Chinese keep a firm bid under its price. This is fully described with actual direct quotes on Chinese policy in the September Hat Trick Letter report. They hide nothing anymore in their financial war, centered upon Gold & the USDollar. See the comments by Ambassador Cheng. The factor is as strong for lifting the gold price as the ‘Greenspan Put’ was for lifting the entire US stock market. China has fortified its strong bid for gold by means of numerous initiatives. They installed a Yuan swap facility for other nations to import products. They are migrating to a Chinese bank system built upon the Yuan. They have begun to sell Yuan denominated Chinese Govt debt securities.

They have arranged to coddle the Intl Monetary Fund and expect to receive boatloads of gold bullion out the back door from the loading dock, thereby avoiding the embarrassment of Western nations handing over gold in exchange for USTreasury Bonds. The IMF gold transfers are clear redemption of gold for USTBonds!!! The Chinese indeed have a bid under the gold price. They have decided to push the gold price over 1000. Perhaps they thought the time was right, after their orders to Obama not to reappointment Bernanke as USFed Chairman were ignored. Bernanke is banned from setting foot on Chinese soil. Obama takes orders from Goldman Sachs, not Beijing.

The key characteristic of the rising gold & silver prices is that they make tiny steps upward. The prices rise a bigger chunk at times, only to consolidate for a few days. The small steps the prices make ensure more stability in their rise. They are self-correcting along the upward path in strong stable fashion. The first stop for gold will be around 1130, on a course toward 1300 sometime in the next 12 months. The stops for silver will be 19 then 21, on a course toward perhaps 30 early next year. Gold has a very powerful reversal pattern and rising trend to provide its strength. Silver has a powerful slingshot pattern and rising trend to provide its strength. In the midst of the most serious monetary crisis the world has even witnessed or suffered, financial organizations and the people are gradually realizing only one true safe harbor exits, GOLD & SILVER. Later on, central banks will be net buyers. Include Russia and China and central banks are already net buyers of gold. The Hat Trick Letter Gold & Currency Report displays one chart that alone provides categorical proof that the practice of hedging against the weak US$ is done in volume.

For several months, it was noted how the gold price had risen to new highs in most every major currency EXCEPT the USDollar. That was Phase One in the Paradigm Shift. The financial environment had to run its course, to cleanse itself, and be subjected to a series of climax events to wash away US financial foundations, pillars and all. After the baseless US$ Death Dance seen last year from derivative contract payouts, the USDollar is finding its true level of value in the sewer.

My theory is simple. As long as Goldman Sachs and JPMorgan maintain firm control of the USDept Treasury and USFed respectively, the USDollar will sink in value and gold will rise in value. When this Wall Street Iconic Tagteam is exposed for the incredibly broad and deep chronic machinations, the climax comes in a US$ crash and a parabolic upward move in Gold. Perceptions change as phases change, and new passage of the mantle. So do exposures and prosecutions, and apparently suspicious deaths among financial managers. See McDonald, Pang, Casperson, and Kelly just in the past week. Details in the Crisis Coverage Report, a separate Hat Trick Letter. The common folks might never know if these are suicides or hired hits in retaliation for lost investments, or even kills to cover up dangerous money trails. Banker deaths in Europe have occurred for several months. Now they come to the Untied States. Soon the kidnappings for ransom are sure to occur. But will they make headline news? As Gerald Celente says, New York City will resemble Mexico City in a few years.


Finally the Gold price in US$ terms leads the globe, with a breakout above the $1000 mark, enough to capture world attention. Only the Gold price in the US$ is breaking out to new highs. The painful breakdown decline in the USDollar is the reason why. All currencies are damaged, but only the USDollar is in steep decline. The first phase is complete, a perverse rise from insolvent liquidations and contract satisfaction. The second phase has begun. Foreigners have had a full year to remove the control levers, to tear down the required pillars, and to force the USDollar exchange rate to seek its true value. A shock will surely be felt, financially and politically and socially when the 30% to 50% decline comes. The 50% decline might come from a formal introduction of a new USDollar, worth half as much, but with a shiny pretty new bill to carry around. Unfortunately, the debt burden associated with the USDollar will also be carried around.

The point is that the gold price is now rising and breaking out ONLY in US$ terms. The sick hangover from the first phase has ended, as the nation enters a dangerous new phase. The Gold-Euro price and the Gold-Swiss price and the Gold-Pound price and the Gold-Canadian$ price are all struggling to rise above their February highs. The four gold prices are shown in the same order. They might actually remain in a leveling pattern until the USDollar is finished with its powerful upcoming decline. That decline has only begun, as another 20% to 25% is assured.




This story must be told from the mountain tops and bell towers. The gold cartel player Barrick Gold plans to cover all of its gold hedge (again). Only trouble is the funds they raise will cover only 60% of their total gold hedge book. This is a serial event, resulting in huge dilution to hapless stock holders in a syndicate outpost firm. They still do not come clean, continuing their half truths. My hope is that Barrick is taken out by a hostile acquisition after a bear short raid on its soggy crippled stock, acquired on the cheap! Could naked stock shorting victimize Barrick???

The Barrick story is central to the illicit control of both gold and some large miners. Barrick not only crawled in bed with the cartel bankers, but grew from the Wall Street cradles after being hatched. Barrick Gold (symbol: ABX) has announced a plan to eliminate its gold hedges. It seems just two years ago they promised the same unfulfilled task. Nobody seems to call them liars. Last time they closed gold hedges on ‘all operating mines’ to be exact. This time they continue the pattern once more. Barrick has entered into an agreement with other syndicate players on yet another secondary stock sale. The set of underwriters includes RBC Capital Markets, Morgan Stanley, JPMorgan Securities, and Scotia Capital for a bought deal public offering to raise $3.5 billion for 81.2 million common shares at a price of $36.95 per share. That constitutes a 10% dilution to their stock on a share count. A $5.6 billion charge to earnings will be recorded in 3Q2009. Ouch, but stock holders must be accustomed to such charges by now. Common shares outstanding will rise from 873 million shares to 968 million shares (or 982 million shares if the over-allotment option is fully exercised).

Barrick claims to have made a strategic decision to gain full leverage to the gold price on all future production, and to exploit the effects of global monetary and fiscal reflation expected to span several years. They see a consequent increased risk of higher inflation and a future negative impact on the value of global currencies. They also note continuing robust gold supply & demand fundamentals. They bemoan the adverse impact to the broader investment community from the persistent huge hedge book (but fail to mention it never goes away). Hence, its share price performance has not kept pace with the gold price runup. The ‘ABX’ shares had actually been an institutional favorite, recommended by compromised brokerage houses in recent years. But they must have exhausted the supply of naive investors who trust their brokers. Why Barrick has not declared bankruptcy is a great question. They keep selling stock to cover their endless hedge book, and dumkopfs keep buying the stock.

Aaron Regent is President and Chief Executive Officer. He said, “The gold hedge book has been a particular concern among our shareholders and the broader market, which we believe has obscured the many positive developments within the company. As a result of today’s decision, we have addressed that concern and maintained our financial flexibility. With the industry’s largest production and reserves, Barrick provides exceptional leverage to the gold price, which we expect will be further enhanced as we build our new generation of low cost mines.” What interesting twists of the facts. They have the worst leverage to the gold price in existence. Furthermore, their secondary stock issuance will not cover their remaining 9.5 million ounce gold hedge position as claimed for the purpose of the stock sale. In other words, they are short that 9.5 moz gold, and chronically lose big money when the gold price continues its upward flight. See the Money Central article (CLICK HERE).

Let’s follow some Mark-to-Market math, useful to understand the painful squeeze on the gold cartel generally, which includes both investment bankers (holding COMEX positions) and mining firms in collusion. Based on a $993/oz spot gold price, Barrick would record a $5.6 billion liability on its balance sheet, to be recorded in 3Q2009 as a result of a change in accounting treatment for the contracts. At $1010/oz (current gold price), the liability is 1.7% greater, almost $5.7 billion. It recorded a slightly smaller but gigantic loss two years ago. One must ask how many decades of profits have been burned up by their hedge book strategy over the last several years??? Barrick intends to use $1.9 billion of the net proceeds to eliminate all of its 3 million ounce fixed priced gold contracts (sold forward at $370/oz) within the next 12 months and approximately $1.5 billion to eliminate a portion of its 6.5 million ounce floating spot price gold contracts. Further hedges remain, like a never-ending nightmare. Based on calculations, Barrick has estimated a cost of $569 per ounce to close the floating rate contracts. (That cost is higher now.) At that price, and based on the $3.5 billion equity raise, they should be able to close out approximately 2.6 million ounces of floating rate contracts. That should leave around 3.9 million ounce floating contracts after all the cash from the announced secondary issuance is drained. To close out the entire Barrick hedge book would call for an additional $2.2 billion. The company contradicts its own claim to cover its entire hedge book with a statement that they are willing to use use debt (corporate or commercial) to close out the remaining hedges if the cost of that debt was less than 5%. So more acid packs rest on the balance sheet. Thanks to Adam Graf at Dahlman Rose for his rundown on the math.

It is my fervent hope that Barrick Gold is pursued by expert short artists (sharks) and driven down brutally in its stock price, then acquired at a crazy low discount price, with global publicity and revelations of its disastrous hedge practices. Its death would herald the upcoming $2000 gold price, maybe $3000. The process might have begun with hordes of selling since the announcement to cover their hedge book. They probably just took the share price down to the secondary stock sale announced price. Look for that stock offering to be lowered further, after the math above is publicized in marketing blurbs. Maybe the market remembers their last ‘cover’ of their ‘entire’ hedge book. Notice the ABX stock is on a downtrend, very deserved. The dilution of 10% is registered in the price move from 42 to 38.

Barrick will still have exposure to at least 4 million ounces short, a two-ton weight around its neck. The stock is stuck in a uniquely strange pattern. The downtrend is attempting to turn upward gradually. Given the hedge book is not yet covered, their exposure remains, above and beyond their share dilution. A sudden run to $1100 gold would crimp their plans, and leave them with even more floating contracts after raised funds are used and spent. China certainly changed the landscape in the last couple weeks, ramping up the Financial Trade War. The gold price right away topped the elusive $1000 mark. Barrick executives might actually be motivated to cover gold shorts before the COMEX defaults and is threatened with a shutdown. The always perceptive Jesse of the Café Americain agrees with this potential motive.

The Barrick reputation has been severely tarnished. Its share price might soon reflect an abandonment, and sell at a further discount as its entrails are examined with more scrutiny. This rotten ABX stock might be due to plumb toward the $30/share price soon. It is NOT a gold mining firm. It is a gold suppression financial subsidiary to Wall Street with an under-developed capital-starved mining business. It is a gold suppression tool, whose viability has been thoroughly assaulted, gutted, and molested. Due to excessive hedging, the company has been hollowed out financially, unable to properly exploit even the deposits on its own properties. It should have raised money to develop mines, and thus exploit the rising gold price. Instead, it raises money to cover its errors in a disastrous strategy. This is precisely an example of what my analysis has called ‘Inelastic Supply’ that describes the phenomenon of a higher gold price resulting in less gold output. We see it in spades with Barrick, the posterboy in gold mining corruption and incompetence.

My hope is that the stock is crippled by abandonment among institutional investors in large volumes, who feel betrayed by their brokers. This stock is often recommended, due to its large reserves, large market cap, and reputation. A hostile acquisition would serve them justice, carve them up, expose their scummy relationships with the Wall Street firms to do their excessive forward selling, shed light on their executive bonuses, reveal the horrendous lack of geologist talent onboard, bring forward the paychecks given to members (of political background) who sit on the Board of Directors, and finally bury this shining example of American Debauchery in the gold community. Its obituary news items would fill financial journal columns for months on sordid details. The positive psychology from the death & burial process would serve the gold price well.


From subscribers and readers:

At least 30 recently on correct forecasts such as the Lehman Brothers failure, numerous nationalization deals such as for Fannie Mae, grand Mortgage Rescue, and General Motors.

“You freakin rock! I just wanted to say how much I love your newsletter. I have subscribed to Russell, Faber, Minyanville, Richebacher, Mauldin, and a few others, and yours is by far my all time favorite! You should have taken over for the Richebacher Letter as you take his analysis just a bit further and with more of an edge.” -   (DavidL in Michigan)

“I used to read your public articles, and listen to you, but never realized until I joined what extra and detailed analysis you give to subscription clients. You always seem to be far ahead of everyone else. It is useful to ‘see’ what is happening, and you do this far better than the economists! I can think of many areas in life now where the best exponent is somebody not trained academically in that area.” -    (JamesA in England)

“A few years ago, I was amazed at some of the stuff you were writing. Over time your calls have proved to be correct, on the money and frighteningly true. The information you report is provocative and prime time that we are not getting in the news. I was shocked when I read that the banks were going to fail in one of your prescient newsletters.” -    (DorisR in Pennsylvania)

“You seem to have it nailed. I used to think you were paranoid. Now I think you are psychic!” -  (ShawnU in Ontario)

“Your unmatched ability to find and unmask a string of significant nuggets, and to wrap them into a meaningful mosaic of the treachery-*****-stupidity which comprise our current financial system, make yours the most informative and valuable of investment letters. You have refined the ‘bits-and-pieces’ approach into an awesome intellectual tool.” -    (RobertN in Texas)

by Jim Willie CB
Editor of the “HAT TRICK LETTER”
Home: Golden Jackass website
Subscribe: Hat Trick Letter

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at . For personal questions about subscriptions, contact him at

Jim Willie CB Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules