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August 31, 2005 |
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As gold declined yesterday rumors began to circulate that a hedge fund was liquidating a massive long position. Whether or not these rumors helped convince a few longs to turn and run is uncertain. What is certain is that as stops were taken out gold bugs patiently waited for the price level wherein bargain hunters would step into the fray. $430 may prove to be that level, or not. As for the tech funds, their actions since 2002 have been consistently baffling: it is as if the tech funds wait until a price surge before buying and then try to sell all at once after a commercial induced decline begins. With this in mind, until some large entity steps up to the plate and either takes delivery or pledges to outgun the commercials it is difficult to believe that any rally has staying power so long as the commercials are increasing their shorts with each tick higher. The tech funds decided that the word ‘short’ was no longer in their vocabulary in late 2001. In short, after reaching $452.20 an ounce on August 12 October gold slid to $430.70 yesterday. The story goes that the commercials will eventually default as they try to cover their short position with gold that doesn’t exist. Not this time. |
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