-- Posted Tuesday, 15 September 2009 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Tuesday, September 15, 2009
“Phenomenally accurate forecasts”
Gold hasn’t made much headway since the beginning of the month, when COMEX futures surged $50 in the space of two days. With the dollar suffering from the vapors, there’s no compelling reason why the December contract should have loitered near $1000 ever since. Granted, that’s a nice, round number, and it probably works smoothly with put-and-call hedges that allow bullion dealers to borrow as much of the stuff as they’d care to without risk. It is the same thing we see on expiration Fridays in the equity options market. When a stock gets “pegged” to a strike price, it’s possible for even small players to transact quantities of stock with notional values in the millions or even tens of millions of dollars. Their tactics go by such names as conversions, reversal, jelly rolls and buy/writes, and they usually yield relatively small profits over short period of time, albeit with nearly zero risk.
That’s about the only reason we can think of for gold to have turned flaccid at $1000: It is a price that is beautifully suited to arbitrage. Although this may have caused gold futures to flatline on the intraday charts (see above), it has set traders’ otherwise stony hearts palpitating with anxiety: over Barrick’s decision to cover its short hedges; over the G-20 meeting in Pittsburgh at the end of this month; and over the latest Commitment of Traders report, which showed the smart money to be betting the “Don’t” line heavily. In fact, relative to open interest in gold contracts, Big Four traders are long 18.5% versus short 28.9%. The figures are even more bearish in Silver, where the big commercials are short more than four contracts for every one they are long. Are these guys ever wrong? Someone asked in the Rick’s Picks chat room yesterday. Occasionally. But you don’t want to make a habit of fading them whenever they line up against something you happen to like.
We’ll Take Our Chances
For the moment, though, we’ll take our chances, since we’ve been expecting December Gold to push up to at least $1074 before bulls conceivably have something to worry about. But at $1000? Gold is toying with the Powers That Be, not the other way around. It is messing with the Fed, messing with the central banks, and messing with G-20. They can gang up on bullion and pound it down by $50 to $100 whenever they feel like it, as we well know. But so what? That might have seemed impressive six or seven years ago, when gold was just beginning to rise off a floor near $300. But if these guys are really omnipotent, why has the price of gold more than tripled since?
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 15 September 2009 | Digg This Article | Source: GoldSeek.com
