Gold + Gold Stocks
Gold bugs don't really believe this is a building big bull market in gold
Richard Russell
Dow Theory Letters
19 December, 2002
Extracted from the 18 December, 2002 issue of Richard Russell's Dow Theory Remarks
Gold -- The Commercials (gold banks, mines who are hedged) had a large SHORT position of 100,000 gold futures on Dec. 3. By Dec. 10 they had increased their gold short position hugely, adding another 25,000 contracts to the short side. These shorts constitute added supply to the market. It's clear that the powerful Commercials do NOT want higher gold.
In the great majority of cases, the Commercials will win the battle. But today the Commercials are fighting the primary trend of a bull market in gold. I'm not saying that the Commercials won't be successful in knocking gold down, but in rather rare instances the Commercials find they are on the wrong side of a powerful primary trend and they are losing the battle. If that happens, if they "give up" and decide that they can't beat the trend, then you can get a shorting panic as the Commercials panic.
Could that happen in the present gold situation? Sure it could. At some point, instead of flooding the gold market with more shorts the Commercials could "throw in the sponge" and conclude that they can't beat the trend. Will that happen? Again, I will only say that "it could."
Gold Shares --Thirty years ago a multi-millionaire and a very successful investor told me something I'll never forget. He said, "Russell, do you know why brokers never make real money in a bull market?"
I confessed that I didn't know.
He said, "Brokers never make real money in a bull market because they never believe their own bull shit."'
I think it's the same thing with the gold mine shares today. Gold is rising, rising, but many "gold-bugs," probably most gold-bugs, don't believe their own BS. They don't really believe this is a building big bull market in gold. They simply don't believe it, and the gold stocks are acting that way.
With new highs in the metal, the stocks are rather reluctant to rally. But this will change in time. Believe me, it will change. Sentiment on the part of the gold bugs -- "Gold stocks have been down so long I forget what 'up' looks like." (Comment from 321Gold: This may be the most brilliant statement from RR I have ever read. Gold bugs should be dancing in the street. Most of them are looking over their shoulders as if they are afraid of their own shadows. This is a gold bull market. Believe it. Hang on for the ride, gold shares are fixing to take you for a ride. -RJM)
Question -- Where does gold have to go before the gold shares "believe it?"
Answer -- I don't know -- gold at 350, 370, 390, over 400? I don't know, but sooner or later they will believe it. Although it seems like it will be "later.'
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