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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (1980)11/8/2003 11:36:10 AM
From: mishedlo  Read Replies (1) of 110194
 
commitmentsoftraders.com

Russ, On those COTs it is important to discuss exactly what is a "large spec" a "small spec" and a "commercial hedger"

This is my understanding.
1) A large spec is a mutual fund or hedge fund or the like
2) A small spec is someone like you or I
3) Commercials are the gold producers themselves

Let's discuss #3. How does even an "unhedged miner" sell its gold or silver. Would you think it is via futures or some other mechanism. If they are selling just a couple months forward as opposed to years like Barrick wouldn't you nearly always expect to see the "commercials" short? Is selling forward 3 months considered hedging? 2 months? 1 month? How do they sell this metal if not thru futures. Is the definition of hedging vs unhedged pertain to the amount sold that is not yet mined? If that is the definition (and I think it is) even a 6 month sale would not change NEM or GG or whoever's definition as an "unheged miner". Now exactly how are they selling this gold if by other than futures. This would tend to always make the "commercials" short (in aggregate) would it not.

Now let's turn to the "Large Specs". If the large specs are indeed the MUFUs and Hedge Funds or whatever, why shouldn't the small specs align themselves with what the big boys are doing? Those "large specs" are providing price support IMO.

So is there really an "issue" at all with COTs on gold and silver? Yes those big boys will bail if it suits them and someone is prone to "run stops" periodically shaking out the small specs or whatever, but the market keeps coming back. As long as the US$ is headed down, and trade deficits stay high, and threat of terrorism is persistant, etc I do not see gold collapsing, nor do I see quality miners like NEM GG HMY etc collapsing either. That does not mean they can't but if they do it should be a buying opportunity not a selling one.

Mish
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