Yes, I agree and there will be a lot of volatility for quite a long time. I'm just waiting for the disconnect between equities and bullion to resolve itself, one way or the other. I've said that March is Golds "tell" month so perhaps we'll see soon, but the weeks not days seems to have skipped the days not weeks and moved into the hours not days thing as far as Bush & co. are concerned before the beginning of hostilities. At any rate here's an article today which says the shorters will cover soon.
Global worries scare short sellers from gold
Signs indicate bullion will rise: analysts
By PETER KENNEDY
Friday, March 7, 2003 - Page B10
VANCOUVER -- Fear that the crisis over Iraq and a falling U.S. dollar will send bullion prices sharply higher appear to be scaring short sellers away from gold company stocks.
Analysts say the recent drop in short positions on key Toronto Stock Exchange-listed companies such as Bema Gold Corp., Cambior Inc. and Kinross Gold Corp. is a sure sign that bullion prices may be headed much higher.
A short seller typically borrows stock from a brokerage and sells it, expecting the price to fall. If it does, the seller will buy stock at the lower price to replace the stock that was borrowed.
In the past two weeks, short positions on Vancouver-based Bema have fallen by 5.7 million shares to about six million according to the TSX, which said the short positions on Longueuil, Que.-based Cambior are also down by 3.4 million shares to 2.2 million. Short positions on Kinross also have declined, by 1.9 million shares to 8.9 million.
One futures trader attributed the decline to the fact that mid-tier gold stocks such as Cambior have dropped so much in recent weeks that short sellers have decided they can't go much lower and are taking profits.
"The gold stocks, on balance, have really underperformed the gold price for the last year or so," said Victor Adair, a senior vice-president at Refco Futures Canada in Vancouver.
Although stock in Toronto-based Kinross fell 32 cents to $10.20 on the TSX yesterday and Bema shares dipped 3 cents to $1.60, analysts say the slide may change soon as anxiety over the threat of reflation and a war in Iraq sends gold stocks higher.
One of Canada's leading gold bugs -- John Ing of Maison Placements Canada Inc. in Toronto -- is predicting that bullion prices will rise to $510 (U.S.) this year. "This will move prices of gold stocks substantially higher." He said the stocks that will benefit from a rally that he believes is still in the early stages include Kinross, Agnico-Eagle Mines Ltd. of Toronto and Meridian Gold Inc. of Reno, Nev.
As a result, analysts say there is much less need for investors to maintain short positions on these stocks. "In the goofy times that we are in, do you really want to be short gold?" Mr. Adair said.
Yesterday, the spot gold price rose $3.70 to $356.80 an ounce as investors braced for U.S. President George W. Bush to make a statement on his campaign to disarm Iraq and oust leader Saddam Hussein.
But the threat of war against Iraq is only part of the reason gold prices are expected to rally.
"Iraq is a sideshow," said Martin Murenbeeld, a Victoria-based gold market analyst. "It is a bump upward on a rising trend."
According to Mr. Murenbeeld, the biggest factor underlying the gold market is the threat of reflation, a scenario that leads the central banks of the world to print money like it is going out of style to avoid deflation.
Devaluation fears are a positive factor for gold because the value of an ounce of gold expressed in U.S. dollars is going to rise if the greenback is being devalued as the U.S. Treasury prints more.
"The way the global economy is unfolding, we are going to see a lot of monetary-based reflation," Mr. Murenbeeld said. http://www.globeandmail.com/servlet/ArticleNews/TPStory/LAC/20030307/RGOLD//?query=John+Ing