The enemies of gold are hard at work.

You can watch them doing it just about every day now, right from your computer chair. All you need to do is go to Kitco.com’s charts page and click on “Live Gold Chart”, and you’ll find something like this here:

Earlier today, the black line showed the exact saame pattern. As soon as NY trading opens up, gold dips, deeply, and then turns on a dime and shoots back up, either to levels higher than at the start of trading, or only slightly below that.

What could possibly explain this phenomenon?

Are fund managers (who pretty much drive the prices on COMEX) sleepy types who are grouchy in the morning hours and hate gold, but then, as the day moves on, they slowly ‘wake up” to the reality that gold is profitable now, so they start buying as the day wears on?

Do they have amnesia, so that this process is “news” to them every morning, and it literally takes them hours to remember that gold is one of the very, very few assets with a bright, bright long term future?

Is it that it takes them all morning to overcome their inbred and ‘in-educated’ [sic] aversion of everything gold, before they can see clearer and then suddenly flip-flop over to the gold-friendly side of the trading pits?

Just keep watching this spectacle. It repeats about three to four times per trading week. ‘Tis a most curious thing to see. Time and time again.

And look how suddenly and instantaneously the rebound usually comes. It’s almost foolproof. I suppose somebody who likes trading could make a lot of money with this: Short gold as soon as trading starts in the morning, and then, before you go to lunch buy enough gold at the lower price to cover all your shorts - and throw your profits back into the long side as soon as trading reverses.

But, alas, it takes strong nerves to do that, and lots of cash reserves, and a very high risk tolerance - and maybe some semi-official backing like, say, from some Asian government that says: “Let’s kill these institutional American shorts and eat their lunch - and their breakfast - and their dinner, too!”

But, then again, maybe working at JP Morgan Chase’s gold desk takes even stronger nerves - because the payoff is simply lacking there. If you work there, get used to having your lunch eaten by this pro-gold crowd of ‘pit-bullies’ that suddenly commands the upper hand - despite your desperate efforts.

(Too bad I don’t have that kind of backing - or that kind of nerve, for that matter. That’s why I stay away from trading pits - or screens, or whatever else that has to do with trading, and tell my subscribers to do the same.)

Yes, trading is sexy - but it tends to leave you naked, shaking in the cold wind, while someone else runs away with your once cozy stash of former money.

Trading is popular. It’s exciting. But only very, very few people really make it as traders. Their followers usually don’t - even though they are paying for the master-trader’s advice though their noses.

But that’s not our subject. Our subject is this: If you were frustrated in the late nineties when the shorts always won, this is the time to “take revenge.” It’s like watching a guy whose guts you hate getting it on the chin for several hours a day - in the ring with Muhammad Ali.

These days, gold shorts are desperate. They have nowhere to run. They can’t run. They’re stuck defending their old bag of tricks. They have been calling “S.O.S.” to their backers - but the backers are in the same boat.

Now, they’re just ... well, S.O.L!

(Question: What do you call a ‘backer’ who himself is running out of backup, and who can’t even back out? Answer: You don’t. You just watch him.) And, Kitco’s 24 hour Spot Chart is the best TV set for that. It’s free, live entertainment of the healthiest kind (to your pocket book as a gold investor), and it’s extremely satisfying.

If you want a little extra buoyancy to get you through the day, just look at the numbers that are neatly lined up at the left side of the chart. Look at the range they’re in - and think back what that was like, back in 2001. And now, picture them having three digits.

Just a quick thought for the day - and probably for many days to come!

Got gold?

January 13, 2006

Alex Wallenwein
Editor, Publisher

www.a1-guide-to-gold-investments.com

Free Report: currencywar@getresponse.com