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Gold/Mining/Energy : Gold Price Monitor

GDXJ 97.44

-1.2%

4:00 PM EST

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To: gold$10k who wrote (70402)	5/25/2001 6:44:39 PM
From: russwinter	Read Replies (2) of 116759

Clearly the commercials sold a good chunk of the gold the specs bought in the spurt to 295, and clearly the commercials cleaned up on the trade back below 280. My guess is that they are or soon will cover those shorts (can switch positions in an instant) and we will settle for awhile in the 272-282 range. Typically, we want to be on the same side as the commercials and the theory afloat that this was a fund generated rally, now appears to be correct. But, I still find it significant that specs and hedge funds were willing to go so aggressive on the long side of this trade. This hasn't happened in a long time, and to me signals that the speculative lean against gold from the carry trade is waning. And this is a reflection of the new (and bullish)gold finance structure now in place. Gold is more expensive to lease or borrow (2-2 1/2%) than it is too buy forward (1 1/2 to 2%). kitco.com As a result the finance structure is not as lopsided as it once was towards sellers. And even though this particular trade wasn't THE ONE, it does not alleviate the fact that there are now advantages to buy gold (cost of carry is inexpensive). Conclusion: more rallies and volatility with bias up. Meanwhile gold demand is quite healthy thank you, setting records. The first quarter of 2001 was up 5% to 826 tons on a year on year basis. Indian demand was up a rather large 23%. And we know mine production is flat at best and maybe slipping. We have started a secular bull market that might grind on for years.

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