I have provided a brief summary at the end of the compilation to hopefully give this issue some perspective. Please post any additional thoughts and data you have at the Gold-Eagle forum at http://www.gold-eagle.com/cgi-bin/gn/get/forum.html .
DROOY- 685k in Oct., 8.6M in Nov., "down" to 6.3M for Dec.
GG- over 5M and steady since June.
ASA- double to 737k in last 2 months.
AEM- almost 6M, and almost 6 days to cover.
ABX-between 8M-10M and 3-4 days to cover.
SIL- 800k-1M and peaked at 8.5 days to cover in Nov.
FCX-12M 8 days to cover, down from over 20M 16 DTC.
(posted by handle CharlesPonzi Jan 27, 17:04)
What follows is a picture of what the gold world looks like on the road from MYSTERY to KNOW:
1) Hedge Funds Exploiting Relative Moves
I think that most of the short positions are hedge funds, but not necessarily making a bearish bet on the POG. Hedge funds have been active on the long side of the market, but there has also been in increase in relative value players , who use "market neutral" or "long-short" strategies, and try to exploit the relative moves instead of the absolute direction. Shorting Newmont against someone else is a classic. Or they try to bet on M&A activity by shorting a potential acquirer that trades at higher multiples and going long a potential target that trades on the cheap side. I'm not sure exactly how much this kind of activity has increased, but I am pretty certain that it has, and helps explains some of the short positions. (J-Lo)
2) A Made At Home Attack To Support An Attack On Iraq
After reading what (sage) posted last evening in reference to the shorts in PM's anticipating "an event" that would cause a temporary decline in the shares - Let me muse a scenario that I would not like to see occur:
This week - Bush will beat the war drums heavily in Tuesday's state of the Union. Gold will continue it's rise putting further pressure on the Au shorts per Sinclair & Murphy.
Results - Bush will not get the positive reaction needed for his war agenda so he will need "an event" to bolster the war ahead. The CB's & JPM will be looking for a way to solve their dilemma with the POG still on the up. They will also need "an event" to relieve the pressure.
Solutions - Another "terrorist attack" in NYC. Two obvious locations: JPM Bank and/or COMEX. And for those of you who will inevitably inquire, no, I am not presently taking any type of medication.
Disclaimer: I personally would not profit from such "an event" in any way.
Possibly the Elliott Wavers believe so strongly in a declining pog that they are betting heavily on it.
By the cabal to maintain the gold is not money illusion. (Apostle_EF)
3) Cabal Using Other People's Money To Create A Tremendous Buying Opportunity For Themselves
Financial institution employees and investment fund employees might be using other people's money to create a tremendous buying opportunity for themselves by using the money of others to lower the prices of gold shares by selling them short as they personally buy them up. (sage)
4) A Planned Event By The Cabal To Slam Gold So They Can Cover Part Of Their Position
The suppressive few have a plan that will result in a severe drop to the short-term price of gold that does not consume gold as a dumping raid does. In fact the cabal will be buyers of gold during this event as others panic and unload. Insiders are taking advantage of this planned event by shorting shares for maximum leverage. (sage)
5) A Planned Event By The Cabal To Slam Gold Shares So They Can Cover Part Of Their Position
The suppressive few are about to crash the stock markets, gold shares included, then let gold run and make a killing by going long gold shares as everyone else dumps their shares. Knowing of this event in advance they are shorting gold shares ahead of it so they win when gold shares temporarily move down and win when gold shares skyrocket afterwards. (sage)
Given the extremity of their position, there would seem to be another possible goal here. Clearly they want to scare pm holders out of their positions. Perhaps they intend to do this to the max, then buy up everything. Then those who have sold will be locked out.
This is quite possible, because the gold mining industry is TINY compared to the buying power of the institutions.
Given the extremity of the mess of the derivatives, owning the gold mining industry may be the ONLY way out of their mess.
If they essentially accomplish a monopoly in the mining industries, they can command their price. This would fit in with many of our past conjectures. (teo)
There is a big push on to steal our pm shares and control the companies, you know that if pm are to soar, the big boys will be benefiting, and as the sm tanks it will be mom and pop that loose. Its the way of the world.
Buy yourself some more pm shares, hold em for a month, you will be very glad you did. (billybob)
I think you're right (PMtrader), this is yet another head fake by the shorts to scare investors out of their PM shares. I've gone through this drill enough times to know when to hold. And I learned the hard way that you don't sell during a bull market. (Grace_Gold)
I believe the short position is NOT about a quick 30% killing, that is child's play, and these sharks can do this in many ways without going near the PM's.
I believe it is about a play to acquire the mining industry on the open market, without any government draconian law, period. All legal, but very sinister.
If the shorts can scare out the bugs, they can buy the industry, lock stock and barrel. Easily. They want to shake out to the max, then settle for the rest.
I believe that is the only OUT they have, the only thing that can pay them off, from the derivatives position. These are not the same players, but are working in concert, clearly.
That is why trading is so risky now. Move out of position and you might never get it back.
That is the play that is going on.
I could well be wrong, but it fits perfectly with GATA.
If you move out, you risk having to come back in at factors higher now. imnsho (teo)
Eliminating margin on gold and silver shares might be the trigger that the "gold long - share short" players are waiting for. With such insider knowledge a person can make a bundle. Ruin their game (and save your butt) by not buying on margin.
Say it is announced that margin for gold and silver shares is eliminated. The "gold long - share short" players would dump their "gold long" leg at a profit and this will slam the POG temporarily. The POG decline and the dumping of shares because margin is no longer permitted on the shares will slam the shares. As the shares bought on margin are dumped the "gold long - share short" players will be covering their "short shares" leg of the trade.
So why help them out? I say "don't". In my opinion no one should be holding gold and silver shares on margin in this environment.
This is similar to the play Jim Sinclair has suggested is underway if I understand him correctly, except his "event" is a war and my event is a regulation change known ahead of time by insiders. (sage)
6) The Elliot Wave Followers Are Plentiful And Influential
The Elliot Wave followers are plentiful and influential and they strongly believe gold is ready to decline dramatically and so have shorted gold shares big time. (sage)
7) Bad Mouthing Of Gold By The Media Whether By Design Or By Honest Belief
Barclay's joined Lehman brothers calling for the end to the gold bull move - stating gold will go back to the $275 area next year. Any wonder why the gold shares are being shorted and by what crowd? (Bill Murphy)
8) Differing Political Attitudes Between The East (gold) And The West (shares)
Even more impressive, Europe took up the direction set out by the Far East, so that gold spent considerable time around new levels around $372, before NY's negative influence made itself felt.
This pattern supports a thesis about the sluggish behavior of the gold shares, which under normal circumstances certainly constitutes a reason for concern. Interest in bullion has certainly surged around the world: TheBullionDesk reported record traffic quite early this morning. But gold shares are close to exclusively a phenomenon of the Anglophone markets. Perhaps the divergence of geopolitical opinion which seems to have arisen between America and much of the rest of the world is simply being reflected in the gold sector, with anxious non-English markets accumulating metal, while confident - or complacent - English speaking investors spurn the shares. (John Brimlow)
9) Belief By Some That An Invasion Of Iraq Is The End Of The Gold Bull Market
So an invasion of Iraq is the end of the gold bull market. What are you smoking? The gold share traders are selling now ahead of an invasion to be out ahead of their fellow community members. The minute an invasion happens, sellers will arrive. Then gold will trade based on war reports just like all war markets. Remember, trading during the Korea Police Action and the Vietnam War. This is textbook in that as we win the equity markets rise and gold declines, but if we bog down the equity markets fall and gold rises. If it takes a long time, equities fall and gold rises. However, when it is over, it is not over. Terrorism could be increased and not decreased, as we may well not be focused on the true Al Queda. Sure, if it is slam-dunk gold will decline but then it will rise again and reach levels I suspect you do not anticipate. (Jim Sinclair)
10) Investors Do Not Believe That Gold Can Keep It's Gains
I think that the relative sluggishness in the shares is due to the unbelief in the staying power in gold. This hesitancy is natural at this point in the cycle since most gold bugs have been continually disappointed during the past 20 years. I agree with Bill that we will most likely see a ferocious catch up soon as the pent up demand by those suspicious gold investors turns into action. Many of the junior companies are about to experience historic moves. As gold moves up and stays at these levels, their value will skyrocket. We are entering an incredible period of change as the old order will become unrecognizable. (LeMetropoleCafe unknown contributor)
11) MAJOR Players Want Into This Sector
How about MAJOR players want into this sector. They place buy orders well below the market. They sell short starting the avalanche in the weak hands... continue above decreasing buys and sells.
Evidence to support this would be spotting large buys below the market ...also a general trend for buying at the close. Have we noticed any of these things? (PMtrader)
Shorts sell, then buy [low] to cover. That is their dream scenario. And with pathetic bugs that run like lemmings on meth, it works every time.
If I was a short I would hope to knock down the price by taking a position, scare true bugs out of their positions, by selling, then buy low.
I think that is the essence of the strategy.
There is more going on, in that they need to scare out all the bugs in order to take possession of the majority of the best mining companies. So this means that the best companies, which we quite clearly see have attracted massive short positions, are the ones they want to possess the most.
The short position in a sense is just a way to intimidate people into manifesting a dip, as opposed to simply waiting for one by voluntary means (which will not happen naturally in a bull market).
Now. In today's scenario, there is a massive short accumulation on stocks that we all revere, and many here hold. If we simply buy and hold and there is no shorting, then the prices stay same or move up. In that scenario, there is nothing else to do but buy and hold. Hence the approach of using shorts to intimidate bugs into selling their core.
The risk is that as shorts close, the shares are bought back and the price must rise. That is why they are in competition with each other. Only one will buy at the lowest price (without playing funny games across US/Canadian markets, which happens). Then the next closes a tick higher, and so on... all the way up.
In a situation where they all rush to close at once, the share price must ramp up enormously. Hence the reasoning that the shorts will fuel the price explosion, as opposed to knocking the price down.
That is why I suggest that the shorts are in competition with each other. We simply hold and watch, in this case. but if you are on margin, who knows, I have no idea about that, things get messy.
All my holdings are paid for in full. I have put sell orders on my holdings for 25-100x the current price, I don't see how anyone can loan out anything I hold under those circumstances. I suggest all do the same, there is not risk at all, other than you make an enormous profit one day by complete surprise.
I never put low stops out on any of the stocks I hold. Knowing full well that the shorts could trigger that, and that if there is any chance that they can do this, they will. Therefore, I ride bareback, so to speak.
The sheer number of short positions on some stocks seems to imply that if there is a mass closing of their positions the price of the shares must rise enormously.
The shorts, having carried out that maneuver, end up holding a stock that is now up [a long way]. They would then only sell for a nice profit, having shaken out the lemmings on the way. Perfect.
So this is how I read my enemy, and why I won't let them have my holdings under any circumstance.
This approach tells me that the shorts are not necessarily bearish on the gold market, but rather that they all think they can close at the lowest price, which evidently is impossible. Into the bargain, they stand to drive out weak hands who will never ever be willing to get back into the game at the next level of share prices.
Hence, buy and hold.
Therefore, it is matter of timing, the very best half dozen timers will indeed close out at the low point, then sit there with their new acquisition and ride it high, while all others rush to close, just like we want them to.
Hope this makes sense, please let me know if I am way off base. This is how I understand the position of my enemy. I am long, and am determined to hold all the way up to factors on the current prices.
The more that do this, the more likely the bugs cream in big mondo profits one day.
I believe it is very dangerous to trade positions from now on. Hang in there, let the shorts fight it out amongst themselves. Otherwise, there is an excellent chance that many bugs will cave and sell at precisely the worst moment.
I have said this before, that some weak hands who like gold will get slaughtered again and again throughout a multi year bull market. Ironic but true.
There are some sophisticated and powerful players at the table, and that is the main "why" of buy and hold for newbies or oldies.
Rise with the tides, that is your best chance. (imnsho)
Good trading! (teo)
I look for things that don't add up and then try to figure out why, and this GFI vol is odd. Especially as GFI pulled a share increase a short while ago. I've read several articles about share suppression in the early stages of bull markets, which allow "Da Boyz" to build positions via accumulation. This is a possible answer as is a rival building a bid base. The general suppression of most gold shares assists this in either case. Time will tell. I note that Bush/Blair will speak at 1600est! Go Gold (kcamyar)
12) The Belief That Gold Is At It's Peak Because Few Know The Real Story
As gold has risen this past year, we have watched the outstanding short interest on pm stocks explode. Same scenario as in 96-99, when the "smart money" knew tech stocks could not possibly go any higher, and they were squeezed to the moon. Only this time, few know the "real" story on gold. All us G-E/GATA readers know, so we are long. Most investors have believed gold topped in the low $300's and were trying to cash in. At $370, they think short profits are a lock. I bet the sell-off we are seeing right now is more short selling than long liquidating, except for the dummies getting margin calls and selling the only winners they hold to cover. Add to this the physical shorts, whose only hope is stop this train before they get run over. Look at it this way: Big pm stock sale going on now. Hurry, supplies are limited. (CharlesPonzi)
13) False Sense Of Confidence Based On Previous Experience
Maybe some short players from the NAZDAQ disaster who did well are getting cute w/ this sector. Perhaps they have looked at the triples in the various golds and are simply seeing a bubble (where none really exists based on a longer time frame perspective). In other words, maybe they are simply in a bad trade and the spot has moved against them. i.e. maybe they are stuck.
Also, you may wish to take a step backward and look from a slightly removed perspective. That is, the shorts are but one element of the "event" ... the broader "event" being radical under-performance of mining shares. In other words, why are the longs not increasing their positions? Have gold mutual funds closed their doors to new money due to "pressure"? Have formerly big players on the long share side been "encouraged" to stay out of the market?
Many, many more such questions come to mind. (Pmtrader)
14) An Event Related To The New Money (U.S.) Coming Out This Year
The new money is coming out this year. Gordon Michael Scallion the intuitive predicts some type of big electronic attack on the markets in the not too distant future. Change comes through crisis/opportunity.
Thanks for pushing the point on this topic there something not right with this situation.
Peace. (Questioner)
15) Legal Benefit To Being Short Shares During A Systematic Failure
Thanks Questioner. There might be more to that thought that we need to probe into.
Maybe short sellers are in the best position of all in an electronic breakdown because they have no non-cash assets as they sold the assets already (short). And are now sitting on a pile of cash. I am not knowledgeable on short selling law.
Or maybe there is no buyback after the electronic breakdown only a cash settlement so nothing to drive the price of the sold shares up like a short squeeze.
Or maybe financial insiders know something about the USD conversion to a new fiat that is to occur soon and the short selling is a way for them to position themselves with more cash to take advantage of something in the conversion rules.
What I said might not make sense, but then a hole in the mud does not look like the house it eventually becomes either. : ) (sage)
16) Systematic Manipulation Of Shares Down and Gold Up - SLOWLY
I suspect there are two things occurring:
17) Cross-Commodity Hedge Activity
IMHO a lot of the short interest in PM's & miners is cross-commodity hedge activity. Say, you were short the dollar or long oil and wanted a hedge against a dollar spike. Since this is a small market, there's leverage enough for metals to be a good hedge. At some point, the dynamics between PM's and currencies will discourage this. Right now, I think that the momentum of the system will limit PM's growth somewhat, barring extraordinary circumstances. There are people willing to lose a certain amount of money to offset potential losses. (neverplayed)
18) There Are PLENTY Of Non-Gold People Out There
In my opinion, a huge short position has only one way to go. Wait until those jerks have to cover. Ever hear the words short squeeze? They will eventually have to throw their shorts in the hamper. :)
Also keep in mind, there are PLENTY of non-gold people out there. Some of them are actually gold haters, and they have no confidence that gold will go up.
Maybe they think they are taking advantage of an anomaly. Also keep in mind the biggest of big shots have lost TONS of money. Who says they're right about anything. (Mr.Copper)
19) Banks Hedging Financing Of Gold Companies
Could be the banks that are arranging all these new issuance deals for the miners. Back in the internet days, loan sharks would lend money to small dot coms, and simultaneously short their stock in the market, so if the company went bust and couldn't pay them back, they made it up by being short the stock as it went to zero.
Not that the same exact case is happening in gold stocks, but something similar could be. Let's say the usual suspects (JPM, et al) are advising company X on a new equity or debt offering, like we are seeing so much of today. In order to win the mandate, the investment banks offer to underwrite the issue at a certain level. They could be hedging that position by being short the stock in the market. (J-Lo)
20) Incessant Harping Of A Gold Price Collapse
And what about gold? All I hear is the incessant harping of the impending collapse. Wasn't that supposed to happen at $351? And at $362? And finally at $372? Yet the gold shares have already priced in the imminent collapse to the $325 zone. And the poor nervous short sellers have their finger on the "Buy to Cover" button, ready to push if gold doesn't correct soon.
And silver is an even bigger joke. The shares are languishing, and silver is being pushed down again. The big surprise this year will be the explosion in silver, not gold. Too many are shorting silver because of its weakness, yet the supply/demand equation is even more out of whack in favor of the bulls. (Marty Mark via richard640)
21) Major Ratio Traders And Hedge Funds Are The Source Of The Gold Share Shorts
Mon Jan 27, 2003
The "Go it Alone" Iraq War!
Author: James Sinclair
Hedge Fund Operations in Gold & Gold Shares.
The Final Answer to the Million-Dollar Question:
Why Are Gold Shares Doing What they Are Doing?
As the short interest in gold shares started to increase, it was easy to excuse the phenomenon as a product of what occurs in markets when active listed options exist. However, that excuse for the short position now defies logic because the short side of the gold shares exceeds the open interest for the appropriate options that would apply.
Are you totally perplexed by the action of gold, which is robust, and the action of the shares which is debilitated? Have you noticed that when gold strengthens, the shares hit a brick wall? Yes, I know you have but have you seen the timing of that strange and contradictory occurrence? The answer to what is going on is shouting at you if you have the ability to see the charts in real time on a one-minute bar overlaid as shares over gold. You will see that as gold is being purchased, the shares are being shorted.
What has occurred is that major ratio traders (those who develop mathematical relationships determined by back testing to balance potential loss and gain on either leg which is subsequently adjusted to their bullish or bearish desires) and hedge funds are the source of the gold share short, being long gold and short the shares. In truth, I cannot blame them where the gold producer hedgers are concerned but it seems they may have gone bonkers with this spread and simply shorted all listed gold producing companies from 100,000 ounces per annum and up. It also looks to me as if there might be a little hanky-panky going on since the short of certain shares seems to exceed that which is reasonably available to borrow. A requirement of a short sale is delivery of shares. These shares are obtained by borrowing. Every major brokerage concern has a loan clerk for this purpose. Only shares on margin are automatically available for lending. Fully paid shares require permission of the lender to qualify them as available to the short seller.
I have given you one lesson on felony 101: explaining how probabilities support Enron as being the yet to be discovered largest money laundry to have ever existed. I will also give you a felony lesson on how to short sell a listed stock without an up tick: back the sale through Canada or elsewhere over the counter where delivery laws are different. This is a key reason why some stocks face inexplicable bear raids on NASDAQ. Now please do not be tempted to employ these illicit strategies. They are only explained so you will understand market phenomena.
So, in my opinion, the short of gold stocks culprit now is identified as Hedge Funds and Hedge Operators long gold and short the shares. The interesting point is that these funds plan to sell gold between $372 and $386 into the Iraq invasion with a plan to cover the short gold stock on a gold bullion price pull back after the invasion.
What have the Hedge Funds gotten wrong? Why are these hedge operators going to be hurt financially on this play?
First and foremost, they have the wrong price at which gold will potential top in the short-term top as we begin the transition between Wave#1 and Wave # 2 of this long term gold bull market. I believe I know the right gold price number but am not eager to put it in print so the hedge funds can hurt the community gold stock traders that they are already taking advantage of.
For those that wish to know the gold price that maximizes this leg, please, if you are not already on my email list, go to www.tanrange.com and register on this site. That way you will go on my private list automatically and save my staff a great deal of work and potential error in your email address. I will have the list carefully reviewed.
I will soon email you an attempt to do the impossible. That is outlining the future of gold in terms of time and price. You will have to bear with me knowing, as I do, the impossibility of such a task. I will present it twice under two different conditions. However, we will constantly monitor progress as the ability to predict from point to point, the gold price is doable, or at least it has been so far in my career.
The Hedge Fund Errors
1/ The Hedgers & Hedge funds are going to exit the futures on gold at the wrong price thereby leaving themselves increasingly exposed to the debits developing on their gold shares position.
2/ The Hedgers & Hedge funds have shorted the gold shares too hard in light of the relatively small floating share supply. In some cases, as I see it, the entire float on certain issues may well be shorted.
3/ The Hedgers & Hedge funds are not familiar with the tenacious nature of the gold share investor vs. the gold share trader and therefore will not get the volume of selling they are hoping for.
Conclusion
As gold approaches the $381 to $386 price level, shares will start to firm and gold's momentum will slow slightly. This will be due to the operations of the Hedgers and Hedge funds getting ready to rake in their expected profits. However, as gold trades into the middle $390s you will see the gold shares start to move ahead of gold momentum-wise as some of the faster and smarter hedgers will see an abyss of losses opening in front of them. As gold passes $400, which will be to almost everyone's surprise, the Hedgers will panic and gold shares will go ballistic.
These gold share shorts, in certain instances, are simply too large and therefore cannot be covered under any circumstance that I can envision. Like the mountain of derivatives, the hedgers have gone wild in this shorting of the smallest capitalization that can be found in any publicly traded industry, the gold mining industry.
What "fundamental factor" have the Hedgers and Hedge funds forgotten that will totally bury them in their gold share shorts well after the Iraq invasion is history?
The mistake made by these greedy hedgers and hedge funds is the definition of the USA going it alone.
What that means is that no one will share the cost of the operation with the US but, more importantly, share the cost of reconstruction of Iraq and its modernization. I gave you a must read in the current issue of "Foreign Affairs." Basically a mouthpiece of the sitting administration, this journal tends to reflect foreign policy trends relatively well. Reading it that way, and not critically, it can be a useful tool in understanding the impact of international politics on markets. I have already told you that since Lawrence of Arabia, the mistake made by the West concerning Middle-East matters have been the same. We fight battles and then, as recently as the Iraq invasion, leave the results in the hands of anything from despots, international criminals to our sworn enemies. As a result, the Mid-East situation for their citizens never changes, but in our terms simply gets worse.
This invasion will be followed by a rebuilding of Iraq as Bush will not stop the fight unless Hussein and bin Laden are history, or more likely, occupying the same hut somewhere in Upper Mongolia.
The cost of this invasion, assuming a short war and the rebuild, is well over one trillion dollars. That will be paid for by expansion of the monetary aggregates. As a result of "going it alone," the USA, who will bear at least 90% of this cost, will gain from the business demand but lose on the impact of all this on the US Dollar. The US Dollar is building multiple head and shoulders, as did Enron and General Electric, with a dollar downside maximum potential well under the low I have suggested to you at 72 on the USDX. This insures that gold will find its way back into the system to prevent the multiple head and shoulder potential for the US dollar from becoming real market prices.
In the final analysis, the War against Iraq will help business activity and hurt the dollar. Gold will rise to a level not expected by the Hedgers and Hedge funds will react and return to the second leg of the long-term bull market from a reaction low so high as to nail the Hedger and Hedge Funds. That low in the reaction to come could even be higher than gold is today.
Recommendation to the Gold share investment community:
Below is an example of a few short situations in less than leaders in the gold field. I am also including a link to an interesting article on gold that appeared in Gold-Eagle.com: http://www.gold-eagle.com/gold_digest_03/jmurphy012703.html
Source: "Shorts Attacking the Gold Miners"
22) A Dependency And Control Play By The Banks
In ref to your question in who's interest it might be to shorten the PM shares and keep their values as low as possible my answer includes the banksters.
With the gold price zooming the mining companies are set on to expand and grow. Where are they going to get the financing needed? As the banksters are keen to direct the lion share of future pm production into their coffers, they must be vying to keep the mines dependent on their bank financing, which naturally will include certain stipulations for control. If the mining share prices would rise to high heaven, the mining companies could go directly to the share markets bypassing the banksters. (HS)
23) An Expectation By Investors That If The Broad Stock Markets Go Down Gold Shares Too Go Down
Is it not a fact historically that if the general stock market tanks seriously, it takes all shares, including gold related shares with it. The latter then recovering first, see 1929?
It therefore stands to reason that, with the thereby confirmed general expectation of further drastic losses in stocks and shares, certain mindsets dependant on previous experiences, would be inclined to seriously short gold shares with the hope of re-inventing the wheel?
Everybody to his own, but I for one, under current conditions, would opt for little if any gold share retractions prior to an explosion fuelled by current short positions. If you have not seen the figures, which I have to take at face value on financalsense.com, then do yourself a favour and check it out. The proportional increases in short positions actually says it all, both in the down and up camps. If I'm right, ballistic is insufficient for Durban Deep (DROOY) and it matters little if I have to take some loss initially.
I wish it were otherwise, and gold shares would merely reflect sound fundamental investment without madness, but I don't make the rules. (ewg)
24) Investors Playing The Collapse Of The "War Premium" Card
Guys, I think it's obvious that the reason there are so many short positions against these PM stocks is because of "war premium". The shorts expect a repeat of '91 and expect the POG will fall whether we go to war or not. I think they see it as a win/win situation in that the POG will correct if we go to war and it will correct if we don't go to war. And obviously they expect the stocks to retrace. (MASONKING)
25) Major Wall Street Players Are Throwing Every Available Dollar And Credit At Their Disposal In Order To Cap Artificially The Gold Mining Stocks To Discourage Investors From Flowing Money Into Gold Shares And Gold
Bottom line: a hedge strategy only makes sense when you counterbalance an entity rising in price against one falling in price. Yet as the gold price rises, in a normal and logical world, unhedged gold producers MUST rise in value too. Anybody attempting to disrupt this equation throws a whole market into dis-equilibrium.
In an ultimately efficient market, the dis-equilibrium will be recognized by speculators and they will act in order to maximize their gains and take advantage of the discrepancy between low market value and the higher real value of unhedged reserves.
The patent illogic of trying to go long gold bullion while shorting gold stocks sows the seeds of its own destruction in the intermediate term.
That is essentially why I place little credibility in Mr. Sinclair's analysis. Rather, from my perspective, the excessive shorting of gold stocks is more an imitation of a "scorched Earth policy" adopted by the gold short funds. Recognizing that another year of triple digit percentage returns in the gold mining sector will trigger a tremendous liquidation in bubble financial sectors (stocks, bonds, real estate) in order to target monies into the far more rewarding gold stocks, the major Wall Street players are throwing every available dollar and credit at their disposal in order to cap artificially the gold mining stocks ( very much analogous to the strategy adopted in the gold carry trade whereby the commercials continued to utilize the gold carry trade to short gold long after the real rate of return had turned negative. However, they continued to maintain the gold carry trade since the accumulated physical short position over the years had become so large (and essentially uncoverable) so as to leave them no other choice but to maintain the gold carry trade as a vehicle of mere gold price suppression rather than a means of achieving profits). The only area in which Sinclair and I are in agreement pertains to his belief that a good deal of the excessive shorting is occurring on a NAKED basis.
The huge acceleration of gold/gold stock shorting over the past month is nothing less than "Custer's Last Stand," as Wall Street digs in its heels and tries to stop gold/gold stocks in their path before they threaten to suck liquidity from bubble markets (stocks, bonds, real estate) in much the same way that internet stocks captured liquidity from every capital corner in America during the late Nineties.
However, if history is any judge, gold and gold stocks will win.....and in a manner that will astonish even the most optimistic goldbugs. (farfel via richard640)
(Editor's note: Bill Murphy, Chairman of GATA, has made this comment numerous times also).
I posted some thoughts before Christmas regarding why the gold stocks were being suppressed. The cabal are absolutely terrified of the general investing public becoming aware of the potential for profit in the gold shares. I said at the time that the cabal had changed their tactics and I still hold that view. They want to clearly demonstrate that there's no money to be made in gold. Bear in mind, the cabal will burn the house down rather than let the market carry out its proper function of purging the debt. They will fail as the system is unstable, as regards timing of their failure, that is unknown. But I feel that when the consumer turns to saving and the housing market turns down in response the system then becomes chaotic and both Gold and Gold stocks rise. Make no mistake, the criminal cabal have no choice but to continue, they cannot turn back and they are bereft of ideas. (kcamyar)
Here's an interesting segment of Bob Chapman's International Forecaster. He mentioned Durban Deep as one of the heavily shorted gold stocks.
"The gold manipulation cartel is at it again, the suppression of gold shares. The short position on Durban Deep is nine million shares or 20% of the stocks float. Overall senior gold producers shares have shorts of over 70 million shares. This isn't normal. What's going on here? We know what's going on. These stocks are being suppressed to make the investing public think that gold's rise is a temporary affair and the stocks won't react any further. The cartel wants them suppressed so that the public won't think anything is wrong with the economy, especially now that they have lost control of the gold bullion market. The stocks most heavily shorted are Kinross 4.1% of outstanding shares, *Agnico-Eagle 8.6%, Newmont 4%, *Goldcorp 2.7%, Meridian 2.6% and Durban 3.5%. You have to remember this is against outstanding shares. What are the percentages of the float less the shares that have been delivered out? They would bring an entirely different picture because gold share buyers are usually long-term investors and much more than usual take delivery of shares. We are digging for additional figures and will keep you informed." (Bob Chapman's International Forecaster via MASONKING)
26) Typical Market Profile
I remember that there was a saying, in the beginning, gold stocks will follow the rest of the market (I think this with reference to recession times) in the beginning and later will fly.
This may be the time, investors are coming back to say gold stocks are also stocks (not gold bugs, but high tech bugs), and looking at gold stocks like rest of the stocks, selling (shorting),
Second stage they will try to distinguish (good apple bad apple) and lift the prices of gold stocks. (lawofeconomics)
27) Conditioning Of Investors
A 21 year bear market does not shake easily. In the spring we few put all we had in gold/silver shares. WE FEW drove up the share prices. Now we need new blood, but the masses have witnessed a 21 year bear market flanked by heavy black propaganda. Our day will come. (sage)
28) The Gold Share Shorts Made A Mistake And Are Going To Get Financially KILLED
From guru poster on sponsor site, this man is wired in!
Why do this? Markets don't move in straight lines with predictable paths. [BTW we will bust $370 next week nice and smooth, settling in the $372-3 range by Friday according to the R^2 predictor, which now sits at a 92% confidence level] The simplest answer is: The powers made a change in policy the week before Dec 4th and decided to let the dollar drop and hence, let the $USD gold price rise. The President's anger tells a story that he wanted more time, but was forced into action by external events. What those events were is a conjecture.
The gold share stuff is noise. The shorts in there are set to get killed. The Frozen Rope upward says so. I don't think there are longs doing this because they would tip their hands by running greedily a bit faster at times then a bit slower. No. We have a ramp up...nice and smooth...right to $630 by the end of the year…
$630 by year end, I can live with that! (unknown poster via silvertri)
29) A Convergence Of Several Of The Above
A convergence of several of the above. None powerful enough to create such a significant short position on gold shares alone. (sage)
There are six main groupings we can put most of the above thoughts into:
Categories 4) and 5) might hurt gold company shareholders in the short to intermediate term, ESPECIALLY GOLD COMPANY SHAREHOLDERS WHO BOUGHT SHARES ON MARGIN or who must liquidate for unforeseen circumstances. Category 6) might hurt gold company shareholders in the short, intermediate, and long term. (All gold company shareholders, officers and directors please note that).
A Request for Help:
Maybe a GATA team expert or supporter with hard data at his fingertips can comb the list and add support to some of the speculation and weaken others to help us close the gap between MYSTERY and KNOW. Jim Sinclair has provided us with some empirical evidence and has drawn his conclusion. However, some of us would like more evidence because the issue is so vital. If Jim is correct, more evidence would make the case more solid and might cause the hedge funds to close out positions. Or more evidence might encourage big players who smell a gold share short squeeze to take on any fragile positions the hedge funds might have. Both scenarios would be very gold share friendly! (Look at what GATA's exposure of the gold bullion short position has done to the price of gold).
Maybe someone "connected" or reputable can survey the hedge funds and estimate the amount they are short gold shares to help us in determining which of the above, or another, force is at work shorting the gold shares. Of course, in return offer to inform the hedge funds of the findings as this is extremely important information to hedge funds. If the hedge funds got themselves into a corner they had better find out that they did so very soon or potentially face financial loss.
At present, we are long on theories and short on evidence. We need more evidence to secure our hard-earned money, our families, our futures, and our dreams.
Disclaimer: All data is posted on a best effort basis and must not be relied upon for investment decisions. None of the above is investment advice. It is provided for informational purposes only. Most, if not all of it, is speculation. Do your own due diligence.
Disclosure: The author is long gold shares, silver bullion and futures.
Sage
February 2003