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Gold/Mining/Energy : Gold & Gold Stock Analysis -- Ignore unavailable to you. Want to Upgrade?

To: tyc:> who wrote (12166)	2/24/2008 10:11:30 AM
From: The Vet	Read Replies (3) \| Respond to of 29622

tyc, I'm afraid that you miss the point when you look at the broad picture. Everything you say is quite true, but the problem with short sales in GLD is that the shorts simply create more stock than there is gold to back it. The overall economic picture of the POG, the value of the dollar or anything else is not relevant. It follows that right now GLD statistics show that each GLD share is backed by .09872096 of an ounce of gold worth $93.09 at the last London fixing. They have officially issued 205,500,000 shares. However they do not publish (as they really can't know for sure) the number of shares sold short, but from published stock exchange figures we know it was around 8 million shares two weeks ago. That means that the real metal backing for the issued shares is short by 3.89% so instead of being worth $93.09 each share is only worth $92.85 right now. If the shorts sold 100,000,000 shares short then there would be a deficiency of over 300 tons of gold which could never be redeemed. In other words the more the shorts sell the stronger their position becomes and the real price of gold or cash no longer enters the equation. The backing of each share of GLD drops alarmingly and as soon as buyers realise that they will no longer be prepared to take the risk of paying the full gold price equivalent for GLD stock.