ole 49r: I keep forgetting about NEM...perhaps it's all the brainwashing Peter Monk has done on us Canadians.
A good small, well not so small, company is Bob Buchan's Kinross Gold. I worked on the merger of 3 small companies years ago that produced this one but frankly, we should stick to the biggies for now since even tier II companies have absolutely no relative strength chartwise.
I think the model of gold exploration has changed forever since Bre-X. In the good old days little biddy VSE companies staked moose pasture and when they got lucky they got somewhere and became high market cap companies. I think nowadays, because it has been so difficult to raise cash most of the small companies do some grass roots stuff and quickly approach the majors for backing, the seniors have even more leverage because they have the ability to raise money in the market place and they get the early, and cheap, stakes in the juniors.
My question is this: With the amount of gold that has been leased by central banks and sold forward by the gold companies, perhaps the best immediate leverage upon a T + 1 might be Comex gold futures themselves . I mean, isn't it possible that the mining companies, if the forward selling is as much as rumoured, open to huge short covering risk? Or at least, they've sold forward so much of their production that a big move in the price of gold will do nothing for their earnings for a while? And the central banks, through leasing, have essentially a net short position and that will have to be covered at some point.
Many conspiracy theories abound. I was reading the Harry Shultz newsletter and they pointed out that the leasing of gold by the central banks along with the talk of selling has kept the gold price down and in Greenspan's testimony located at bog.frb.fed.us he said, "Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise."
Why didn't they do this in 1980? And if a genuine washout should occur due to complete apathy, and there is convincing market sentiment that it has, since no one even cares about gold anymore, just the covering of the Dreaded Yellow Metal that has been leased out in itself will cause a technical rally in the market and it will feed upon itself in a scenario much like the "no lose" yield spreads between treasury bonds and junk bond positions a la Long Term Capital Management last year. Too much complacency has set into the short side that is bound to come back and act as fuel for upside. And I'm not even a gold bug! |
