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But investors have more ways to hedge. “A guy might be getting massacred in the futures, but he might be doing something in the OTCs (over-the-counter trading) in Singapore or London or Hong Kong. He might have written a call versus a net-long position and his parachute kicked in. So he might only be out $35 an ounce versus $120. I just don’t feel the same urgency that was there during other market declines,” Thomas said.
People are freaked out by short-term factors. I think the longer term is amazingly bullish for gold. I’m still in the gold business and I’m glad to be there.—Francois Perron,
president/CEO of QMX Gold
But new trading instruments can also exacerbate the mania. Ira Epstein, director of the Ira Epstein division of the Linn Group, told Kitco: “I think you’re witnessing the first really big historic sale of the ETFs combined with the futures contract. That to me is something we just haven’t seen.… They’re going lockstep with each other. As people are liquidating their ETFs, it’s causing more liquidation in the futures market, because they balance out at the end of the day.”
“Bear market” talk might be bull
While Peter Grandich appeared to concede defeat, Jeb Handwerger at Gold Stock Trades warned against “capitulation.” Adrian Ash of BullionVault emphasized that he doesn’t make price predictions. But in a GoldSeek post he cautioned that bear market prognostications can become self-fulfilling prophecies. By dropping more than 20% from its peak, gold has in fact hit “the technical definition of a ‘bear’ (according to Wikipedia if no one else),” Ash wrote. “Such drops are certainly rare for gold since it began rising in 2001. But in both mid-2006 and again in late 2008 the gold price fell harder, down more than 25% and 33% respectively before resuming the upwards trend.”
A gold miner’s long-term optimism
Speaking to ResourceClips, QMX Gold TSX:QMX president/CEO Francois Perron looked at the past, the present and the longer term. “I think there’s a difference between a speculative run on gold, which is what I think we’re going through right now, and something that we experienced back in the early ‘80s, when the government increased real rates four or five hundred basis points,” he said. “Now real rates are still negative, inflation is moving, especially if you measure it the way it used to be measured, countries are running deficits, they’re monetizing their debts.
“People are freaked out by short-term factors. I think the longer term is amazingly bullish for gold. I’m still in the gold business and I’m glad to be there.”
For some comments on gold manipulation, click here.
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