Bill: I certainly enjoy reading your comments on markets, and on the precious metals in particular. As someone who owns several junior mining stocks (at higher prices than current ones), I would love to see metals prices go higher. I am neither a gold bug nor a doom and gloomer, although I do believe that at the margins there is manipulation that occurs in our markets - equities, bonds, and especially gold.
In reading your commentaries what troubles me, as one who is biased in favor of higher metals prices, is that much of your thesis for a higher POG is contingent upon the "doom and gloom" senario. I find it highly troubling that over the past 18 months, when the world financial system has been beset by unprecedented volatility and crises, gold has been a non-factor as a vehicle of investment safety. I certainly recognize that had the Asians, Russians and now Brazilians held part of their assets in gold they would now be much better off - but they didn't. It seems that if gold has now lost its "safe-haven" status. What status then does it have left? Gold now seems to be consigned to be just another commodity, rather than a store of value.
Certainly your and Mr. Veneroso's contention that the short position in gold is much larger than widely thought could at some point trigger the mother of all short covering rallies. But aren't most short covering rallies technical phenomenoms (ie: temporary) rather than fundamental ones (ie: more permanent)?
I guess what I am getting at is that the heart of your argument for a higher gold price strikes me as a one desperate at best, based on a meltdown senario (doom and gloom), and a technical senario (a temporary price move). I therefore find it hard to find comfort in your forecast. Absent either, my question is what happens to the POG?
My own feeling is that going forward, what needs to happen for gold to move higher is renewed fear of increasing price inflation. It is here where I hold out some hope. Afterall, the world's central banks are gunning money creation via recent easings of monetary policy, and consumer demand is robust. An increase in money supply usually has a 9 to 12 month lag before it works its way through the system. This is the best hope for an increase in the POG, I believe.
Please do not take my comments critically - I am on the same side as you in hoping for a higher POG. However, I would take more comfort if your case for a higher POG were predicated on more than a "Hail Mary pass" - ie: a doom and gloom senario and/or a temporary short covering rally.
Thanks for your past and continuing insights.
Mudman
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