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Bullion Surges in Late Day Rally
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Can you say “Short-Squeeze?”
After the nice $10 or so rally
in gold bullion prices the past week - surely a little profit
taking and back-filling might have been in order today. It
took considerable buying power to take out $330, and one would
expect the bulls to take a little breather. The US Dollar
stopped falling and was up a few ticks today. The senior stock
market indexes were up nicely (DJIA up around 150 points by
the time the NY Spot bullion market closed). So what gives?
Why, after teetering in earlier trading, did the price of
bullion suddenly pop $4 in the last hour of trading to close
at a new high of 337.10? (check the 24-hour price chart at
www.kitco.com).
One clue may be the soaring crude
oil price now threatening to test $30 as the horrible situation
down in Venezuela which is becoming better known, with oil
exports out of this major producer now virtually shut down.Congrates
to all who are on board for the ride! My initial target for
next year is a run to $353, I’m guessing in the first
quarter of 2003. Enjoy.
My guess is there’s more to it
than than.
Can you say “short squeeze?”
By the end of last week, the “commercials”
(futures traders) had piled on their short positions big time.
Normally the “commercials” are right, and the “specs” (individual
speculators) are wrong. Could this be one of the few exceptions
to the rules? Could it be that nobody in there right mind
wants to divest of gold right now - with such an important
resistance level taken out last week, with the US Dollar Index
decisively breaking last week, with it being so early in the
bullish season for gold, and with so much geopolitical risk,
and now a potential oil squeeze at hand to boot?
Selling gold that’s actually owned
would be one thing right now. But to actually be short the
metal - a person would have to be out of their minds. Now
I am hearing rumours circulating (unsubstantiated) about some
kind of a short squeeze happening with physical gold bullion
inventories.
I would be the first to admit that
I am no expert in this area. I leave the theories regarding
massive short positions and price manipulation by the PTB
to the folks at GATA, Bob Chapman, and others. So I
have no definitive comment to make with regard to these mysteries
of the universe. We got back into gold because of the mining
production supply shortfall that is ahead, because this can
be determined through reliable statistical reports from independent
consulting firms such as Gold Fields etc. I can hang my hat
on these trends. Just how much truth there is to the price
manipulation, just how much gold JPMorgan has sold short,
or not, are beyond me. So I hate to make presumtions based
on these issues. Nor though, would I rule them out.
However I did participate an interesting
conference call at the Vancouver chapter of the CSTA with
Canada’s top technical analyst this past Thursday - Ron
Meisels, President of P&C Holdings, a firm publishing
under the trade name of Phases & Cycles and specializing
in the independent research of Canadian securities.
And when I asked him what he made
of the breach of resistance last week - he told me that he
expects two “impulses” - an initial one into the $350’s and
another to the $400 area - “not tomorrow” but “more quickly
than you might expect.” He stated this with such matter of
fact conviction - that it sounded like these were already
“fait accomplis”. As certain as the sun will rise in the east.
He went on to say “We made a lot of money last year on the
gold stocks and we plan on doing it again this year” (I am
paraphrasing).
Given his esteemed opinion, given
the timing, we just might have an extremely rare occurrence
here - a boni fide short squeeze.
I’m speculating on this and not
suggesting any actions here - we are not day-traders. We’re
buyers and holders for the time being. I just wanted to pass
along Mr. Meisel’s spine-tingling comments, and to make note
of the unusual strength today. I would suggest to not even
think about short selling anything gold related for the time
being if you are contemplating such a move. ’Tis the season
to hold on now.;-)
The other interesting observation
is watching the gold price outperform the gold stocks for
a change. I’ve had numerous readers express concern about
this. For instance where gold bullion has made new five year
highs, the stocks are still well below their highs of late
May/early June.
I’m not concerned about this. There
are going to be periods where the stocks vastly outperform
the metal like in the first half of this year, and times the
metal will outperform. Gold has been playing catch up lately.
Overall the ratio is estimated to be a 3 - 5 to 1 over the
long run in favour of the stocks. With it being year end,
and with the fairly brutal correction that started in June
still in recent memory, investors and speculators are a nervous.
I even spoke to a caller on the radio last night who claimed
he had ditched all his gold stocks on the uptick last week!
This will change in due course.
Meanwhile - encouraged by the bullish
action of late - the folks at GATA can smell victory and are
going for the throats of the shortsellers - check this out
at the Goldseek site: What Have You Done for Gold?
(http://www.goldseek.com/cgi-bin/news/GoldSeek/1040072010.php)
Stay the course, it appears the
fun is just getting underway.
P.S. My Canada wide interview with
Stirling Faux was was blacked out in the Vancouver area last
night, my appologies to local subscribers. I was bumped by
the Canucks game.
********
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Louis Paquette
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