<None the less this market is acting like a bull not a bear.>
Longer term I think you are correct. But shorter and intermediate term, my strategy is too cut back, (but not get out), when I see this kind of extreme COT reading. As I said, I'm less concerned about the 50-60k short kind of number. I would begin reloading once the commericals numbers become more benign (50k or less short). That has worked so far this year, when the commercials went to a high number during the 390 run, and cut back substantially on their shorts at 330.
The are some interesting developments in the gold market, including this story:
Newmont is Telling J.P. Morgan to "Take a Hike!" The
following was reported from GATA Thursday: "The big
gold news of the day concerns gold derivatives. There
is a commotion going on behind the scenes in the
bullion-banking world. Word has it that Newmont Mining
is taking it to one of the Hannibal Cannibals, JP
Morgan Chase. It has to do with their Yandal operation
in Australia, which Newmont inherited when it took
over Normandy. That property has 3 million ounces of
gold reserves with a 3.7 million ounce hedge on - one
that is going underwater as the gold price soars.
Morgan has called Newmont for a margin call.
Supposedly, Newmont is telling Morgan to stuff it, or
more appropriately, if you insist on the margin call,
the property is yours. I'm told that Newmont is
willing to buy back their hedges from Morgan, but only
for so many cents on the dollar. In other words, they
are playing hardball. Newmont can walk because the
property is "fully encircled," meaning it is a
stand-alone project. Of course, it won't do much for
their bullion-banking relationships. "The following
was filed yesterday with the SEC:
sec.gov
"Newmont Yandal Operations Limited ("Yandal") advises
that on May 21, 2003, it received a notice from a gold
hedge counter party alleging a right to terminate a
gold hedge counter party contract with Yandal before
its scheduled maturity, based on the alleged
occurrence of an early termination event under the
contract. Yandal estimates the payment required to be
made under the contract would be approximately U.S.
$46 million based on an assumed spot gold price of
A$560 per ounce. "In addition, Yandal also received
notice today from Newmont Mining Corporation (NYSE:
NEM) ("Newmont") that it intends to make an offer to
acquire all of the 8 7/8% Senior Notes currently not
owned by Newmont, in addition to all of the gold hedge
counter party contracts entered into between Yandal
and counter party banks. "-END-
"The problem is not a small one for Morgan if Newmont
walks. The hedge is 700,000 ounces more than their
reserves and that's if someone is mining them. 700,000
times $370 gold is $259 million. At $470, it's $329
million. If the mine somehow becomes inoperable, the
problem could become catastrophic. It serves Morgan
right for allowing that kind of hedge in the first
place. That's not a hedge, it's a speculation, put on
back in the Hay Day of the gold rigging operations.
What goes around comes around. Chase influenced
Newmont to put on a big hedge at the bottom of the
market around $265 gold, right before the Washington
Agreement was announced. "The ramifications for the
gold industry could be dramatic if Newmont sticks it
to Morgan. Gold is only at the $370 level. What
happens when gold rises hundreds of dollars per ounce?
There is liable to be one counterparty risk problem
after another. Ever hear this one before? |
