Last night’s BLOG attempted to make sense out of all the chatter around the gold action of the last few days, and, more importantly, during the last several months. The points I tried to make were:
- A reiteration of a theme I have stated over and over again, that the GOLD MARKET WAS/IS A TIRED BULL and that investors were leaving the moorings of great store of value or haven. The GOLD has been the repository of investor and traders confidence in a very unstable, insecure investment climate. The GOLD has risen for 11 straight years and as any market can correct as the financial landscape changes. As investors have gained comfort that the world central banks have for the moment been successful in generating some economic growth, money has left the precious metals in search of more risk-oriented assets with a yield attached. It is no mistake that it is the large-cap, strong dividend stocks that have led the way. A failure to understand that and react accordingly is just a case of myopia;
- I, IN NO WAY INTENDED TO INFER THAT I HAD INTERVIEWED JIM SINCLAIR AND THAT HE PROVIDED ME WITH A PRICE TARGET FOR THE CHINESE. HE DID NOT AND I CERTAINLY DID NOT INTERVIEW HIM. THE ONLY POINT I WAS TRYING TO MAKE WAS THAT I AGREED WITH JIM’S RECENT COMMENTS ABOUT THE NEED FOR CHINESE AND RUSSIAN GOLD PURCHASES TO PROVIDE THE NEEDED BUYING TO STEM THE AVALANCHE OF SELLING FROM FUTURES, OPTIONS and ETFS. When markets correct, be that housing or stocks, it is THEN YOU LEARN THE PAIN OF LEVERAGE. Gold has been a very popular, profitable investment, which means that in today’s world of financial engineering leverage is involved. I wholeheartedly agree with Jim’s analysis that the massive selling can only be absorbed by a massive buyer, be it a desirous procurer or somebody with a massive short wishing to cover.