. A letter to the editor of the National Post re 'gold hedge fever' Anon December 23, 2002 Regarding your article titled: Gold hedge fever Hedging gold price risk may allow a producer to make greater profits, and may depress the price of gold in the process. Is that any reason to sue? To start I would like to explain that I am an IA with a large brokerage house in Canada. I would also like to acknowledge the fact that I am not taking sides with this suit. What I tell my clients is it is better to not be involved in a company that has such accusations against it. As for the reason for my response to you. With all due respect I think that your article lacks some understanding of the suit (if it can be put that way), perhaps better explained as allegations. If this is not the case I apologize, as it then represents a one-sided comment that does not fairly represent both sides. Barrick stands to profit in many ways from these processes used in the allegations (I am not accusing them of it, as I am not a lawyer or judge). I don't believe that the suit/allegation is one dimensional as you allege. Hedging is a great form of predicting profitability etc. which I am for. There is more to this. The suit alleges that the price was kept in check so as to allow ABX to continue its hedging at a profit. Reasons: By using forward contracts they obviously allow themselves to guarantee a higher price on delivery. If the allegations are correct then there was collusion on both parties parts. The price was manipulated downward towards the maturity of the contract. By manipulating the price of gold downward, it allows ABX to be more competitive in the market place. Lower prices make it more difficult for junior companies to produce and explore. With lower explorations less discoveries lead to eventual increased demand/lower supply. Eventual increased demand/decreased supply will lead to eventual increased prices. Which ABX will be able to profit from in due time if they happen to get on the wrong side of a hedge for a quarter or two. By keeping them down for so many years it has allowed ABX to increase its reserves, buy up smaller companies at largely discounted prices and prepare higher cost mines for eventual production. Eventually there would be a sharp spike in the price of gold, and low and behold in the last few months or so ABX has made it publicly clear that they were winding down their hedging program. Coincidence?! Once again I am not passing judgment on ABX (or you for that matter). I do however believe that there have been some active parties trying to supress the price of bullion. In your article you mention that you have closely looked at ABX's hedging program, there is nothing wrong with the practice of hedging, that is not the argument. You also elude to the fact that companies have the right to make money, that is not the argument (and I for one believe in the free world as much if not more than you). The argument/suit/allegations accuse of collusion and monopolistic activities on the part of two companies that have the ability to carry out these acts. Imagine if you will that these allegations are correct: think of the investors that were cheated out of an opportunity because their investment went bankrupt, or their company sold for a song since they could not make ends meet, or co. XYZ has not made the money that they could have, or think about all the mines and undiscovered property that has been left, how about all the workers that have been laid off since their companies could not produce profitably. I hope you take all this into consideration when you write another article regarding this matter. I think that the media forgets how much influence it has on the average investor. I do this for a living and will have many clients call me on Monday and over the next few weeks with questions about articles like this one and others that predict Nortel will hit $100 again or $.79 again. Is it a wonder that there is so much panic in the market place on a daily basis? The majority of investors will take this view and perhaps invest in ABX due to your article because of its source and your credentials, what happens if ABX is found to be guilty of these practices, you won't be quite the guru then. Sincerely Anon (Due to the nature of his work, the author prefers to remain anonymous) December 23, 2002 Response to Anon from 321Gold. When investing in anything, it is of prime importance to use logic and facts to form your own investments decisions. In computing and investing, the GIGO principal works. Garbage in equals garbage out. For four years, one site has maintained there is a giant conspiracy to manipulate the price of gold and a CARTEL including both Barrick and JPM were responsible for selling so much gold forward that the financial system of the world was threatened. And for four years prospective gold investors have been bombarded with a constant negative message saying gold was a controlled market which was on the verge of blowing up, taking the world's financial system with it. Early this year we were even told the exact price of the explosion which for four years has been "any day now." "Gold will, IMO, streak first to $354 (that number produced via derivative extrapolation), where all hedged mines will bankrupt, & central banks will sell gold" Well, gold went past $354 to $355 based on nothing more than a short squeeze in Japan before correcting lower without the assistance of any central banks. The gold derivatives didn't blow up, no bullion banks collapsed and in fact, JPM went up 6.6% on the day. If Anon had actually been interested in balance which he is seeking of the National Post, he would have pointed out that the same company seeking redress from Barrick and JPM was advising their clients to sell gold when it was $260 based on there being no future in investments in gold. Blanchard & Company was wrong then and they are wrong now. The suit is no more than a cheap publicity stunt aimed at two companies with unpopular (with gold bugs) policies. We maintain that Barrick's hedging is Barrick's problem. The market has done a wonderful job of punishing Barrick when it disagrees with their business decisions as it has punished JPM. Making a profit for your shareholders didn't used to be a legal problem. I wouldn't own Barrick on a bet but Blanchard refuses to answer any questions as to what proof they have of wrongdoing on Barrick and JPM's part and as such, I can only concede this is one more attempt to hijack the American legal system ala suing McDonald's for selling hamburgers. There is no gold derivatives problem at the bullion bank level and $354 gold is as meaningless to the system as was $252 gold. Supposed gold sites peddling nothing more than disinformation and illogical rumors would do better convincing their readers of the true story of gold. Gold isn't the problem, it's the solution. -Bob Moriarty December 23, 2002 321gold Inc Miami USA