The "commercials" are the ones who are long the stuff because they produce it. So it is possible - perhaps even likely - that they deliver the physical gold on expiration.

You have to respect the Bond King. Wasn't he calling for the current rally days before it happened? Wasn't that also about the time XLF did its reversal and shot to the moon? Do Snow and Greenspan whisper into his ear?

Producers in all commodities hedge their production through the futures exchanges. I don't have the knowledge or experience to comment on Teresa's comment. But I can comment on the "trade" that has been going on for a number of years in hopes that others don't get caught buying and selling when they shouldn't.

The "COT trade" went something like this; there was a cycle to it, as gold approached a low, maybe on some news negative to gold and positive to the $USD, the commercials would have accumulated a large long position (that you could view on the CFTC website). Small traders would be puking (selling) their longs right into the commercials hands at the low price. This was when the gold newsletter writers would be calling a bottom because of the commercial long to short ratio. You see, the commercials were viewed as infallable because their batting average was about a thousand, so when the ratio of longs to shorts (or vice versa) hit a certain level, the writers would make their call. At the top, the commercials would be extremely short and would push the price lower as the writers would call a top. Joe public who sold out at the bottom of the last move because of fear, would be buying in at the top because they "never should have sold in the first place". Whipsaw.

So the gold market was definitely a market where big money "played" the little guy. I used to get frustrated with the way the little guy would play into the commercial's hands, over and over again - until I just went with the flow and bought from those fearful enough to sell to me, and sold to those greedy enough to buy at the top of the move. This is something that Bill is trying to teach NOT to do, and I hope any newbie to gold and gold shares listens.

So the newsletter writers are probably (I don't know) calling a top here. So what if they end up being right again, I have money waiting to add to positions if we get fortunate enough to do so at lower prices.

3 days with closes over $500 and we may not see $500 again, but if things continue like the last few years, we will all have many opportunities to purchase the gold shares of our choice at oversold levels. Two steps forward, one step back - at least until governments stop printing money.

Good luck.

MarkM, you do have to respect the bond king for what he has accomplished. However, you don't have to listen to him now, he talks his book.
g034

g034-
Thanks for your insight. What did you mean by "3 days with closes over $500 and we may not see $500 again"? That it becomes the floor?

Had TODAY earmarked as the day to add to positions if weak again then BOOM then thing took off! I was forgoing a seasonal play in energy because this opportunity makes more sense to me. Oh well....

Teresa's point is well taken, but there are 3 items that may affect the ability and willingness of producers to cover by delivery:

1. If the delivery dates are in the future, the producer will have to finance the margin. This has buried a few mining companies in the past, even in fantastic gold markets.

2. There is a trend among producers, started by Newmont about three years ago, to de-hedge. Mining companies understand that they will be given lower market values if they are hedged, so many will want to remove hedges now even if they could ultimately sastisfy them by delivery.

3. Several years ago, mining companies would just lease gold from central banks to satisfy short positions. Now, I understand lease rates are moving up with interest rates and this option is becoming less attractive.

btw Teresa I have long been a fan of your work and enjoy seeing your comments on the site

Its strange that someones who claims
interest rates hikes are almost done to be
buying floating rate instruments.

2005-11-28 PIMCO Floating Rate Strategy Fund (PFN) GROSS WILLIAM H Executive Committee Purchase 10,000.00 17.64 176,399.00 10,000.00

2005-11-28 PIMCO FLOATING RATE INCOME FUND (PFL) GROSS WILLIAM H Executive Committee Purchase 2,800.00 18.10 50,680.00 2,800.00

His track record of his buys has been the best for any insiders(pcq, pck, pzc). His buy of pfn is a small amount for him but this was the inital
pattern of his other buys. Will keep an eye
on to see if he adds on. Also there was another insider who bought 30,000 shares of pfn last month.

In any event, if you like gold and are trading it, the best thing to do is probably be long with a stop and let it rip.

We can all speculate as to how far it will go, but only the hairdresser knows for sure. ;-)