Ken...I agree...in spite of all the putative short positions posited by the conspiracy theorists, there is simply no URGENCY to cover those positions being technically demonstrated on this rally...thus the possibility of long term harm to the gold market is real. This rally may be almost OVER. If so, it will be over for a long time. This has been the pattern of this gold bear...anyone who bought on strength during increased volatility gets screwed. Buying gold when oil is at a high is also not a good idea. Airlines are a better bet. Not only has the basis for option pricing declined (POG down twenty since two weeks ago), but implied volatilities have also dropped, removing the urgency of the Cambiors of this world to cover...all they have to do is take out a further loan, and then mine the hell of their reserves to produce deliverable gold to fulfill their requirements. The posited short squeeze then fails to materialize, AND SUPPLY INCREASES at the higher price, along with NEW HEDGING by the previously unhedged miners who are very grateful to lock in one apparently last chance for survival. This is not a recipe for a bullish situation. Given the fact that it is now not obvious HOW TO PARTICIPATE in a POG rally, other than by buying bullion (not likely by most regular investors), as gold stocks are now TOO TREACHEROUS even on rising gold prices, most players will now avoid gold completely. You now have to not only be right on POG movements but possess a detailed understanding of each gold stocks balance sheet just to pick stocks which will correlate properly on a big POG move. It is the TRICKINESS of this which ultimately gets most investors. The other weirdness compounding all this is that THE WORST HARM from the 1987 decline was experienced by gold bugs. And it does seem to me to be uncannily similar in the general economic situation to that period...This is contrary to popular logic - if you bought gold stocks during the 87 decline, you were seriously harmed. Strangely, this could be a LAST GASP of a drowning metal, which has no apparent usefulness other than immutability. Don't get me wrong...I went heavily long at POG 255 on Kinross - because it was majorly unhedged...I still enjoy the thrill of the chase...but I am one of those profit takers at the 325 level. I'm not going short though now...this is still likely to be a continuation pattern in what will someday be revealed to be a bear market rally methinks. The major question in my mind is - if one is to accept the risk of speculating in metals and metals stocks, why bother with that metal which has the LOWEST RELATIVE STRENGTH...if one is trading from the long side? Buying platinum and shorting gold against it makes more sense.
Cheers |
