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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (41777)9/19/2005 7:24:50 AM
From: basho  Read Replies (1) of 110194
 
Yes, I wonder about gold too, Russ. While I've held (and still do hold) a decent core position in physical and gold stocks for years, I have zero what I might call spec exposure at all. This feels a bit unnatural, particularly with gold doing a pretty good imitation of launching into another bull leg.

Given the rapid rise in OI in the last few days, I'd guess spec longs and commercial shorts are once again at extreme levels, particularly against OI adjusted for spreads. It's interesting that OI is much lower than at previous times of peak interest in gold in recent years. It may be wishful thinking on my part, but I wonder if this may mean this latest rally is structurally weaker and that the major dump I've been half expecting for months may still arrive.

At some point, I fully expect the commercials to get rolled as they did in 1979-early 1980. Question is, are we at that point yet? I confess I have trouble seeing it. Like you, I suspect a major slowdown is nigh and that before we get to the stage where gold is primarily driven by monetary demand (which is in turn essential in my view for a genuine runaway bull market) there are a few acts that need to be played out. Like fears of a serious slowdown, commodities getting trashed for a while, a rapidly steepening yield curve and eventually growing fears for systemic stability.

Maybe we'll jump all those phases and go straight to the final act but for the moment I think I'll keep my spec powder dry. Be interested in your thoughts on this vexing question.
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