Inglorious defeat for…..

Posted by Richard Russell - Dow Theory Letters

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A brief excerpt of the lengthy daily internet comment by Richard Russell of Dow theory Letters. One of the best values anywhere in the financial world at only a $300 subscription to get his report daily for a year. HERE to subscribe.

The skepticism (even hatred) toward the gold advance is positively amazing. I remember back in the 1970s that people were surprised at rapidly climbing gold, but there was nothing like today’s cynicism and anger. I just received this mailing from a widely read advisory dated Sept. 8 — “Gold has just seen a big blowoff top with a minor penetration above $1,000, just to get everyone excited enough to buy in at the top. Silver has been even more exciting, which is typical for tops. Expect precious metals to head down to a major cycle low due in December.”

Jason Hamlin, founder of GoldStockBull, has put forward four major developments which he thinks all gold-believers should be aware of.

(1) China (today everything seems to depend on China) is encouraging its citizens to buy (accumulate) gold and repatriate any gold held in London. As recently as 2002, the possession of gold in private hands was prohibited in China — now we’re seeing a dramatic reversal of policy. “It’s glorious to buy and hold gold” is the official stance in China.

(2) Barrick Gold Corp. has decided to begin closing its huge gold hedge book. This will entail Barrick buying millions of ounces of gold which they have shorted. Barrick is preparing for a higher gold price. The word I hear is that Barrick has bought 2 million ounces of gold and is expected to buy another 3 million ounces. This is supposed to cut its hedge book by half. Russell Comment — What, only half?

(3) COMEX Commercial traders have taken the largest net short position ever against gold and silver. Normally this huge addition to supply would knock the precious metals down. But this has not happened, at least, so far. Evidently, buying in gold and silver has been powerful enough to pressure the commercial shorts. They will have to put out more shorts (a dangerous move) or be forced to cover (note:the commercials are usually the gold mining companies).

(4) Gold and silver have slipped into backwardation. This occurs when the price of a commodity for immediate (spot) delivery is higher than its price for future delivery. One interpretation is that people who control the supply of the metals can’t be persuaded to part with their supply, and this suggests that there is more demand for immediate physical delivery than there is an immediate supply of metals.

With the news that China and Russia are scrambling to build up their supply of gold, this could mean that the demand for gold is intense.

Adding to the above, the central banks have now turned into net buyers of gold rather than sellers.

All in all, the precious metals situation is now fascinating, and the anti-gold interests (those who create fiat currency, i.e., the central banks and the inflationists) may, at last, be facing an inglorious defeat.

… this excellent article HERE.


(Ed Note: Richard has a section on mining stocks. Suffice to say he still likes them)


The 84 yr. old writes a market comment daily since the internet age began.  In recent years, he began strongly advocated buying gold coins in the late 1990’s below $300. His position before the recent crash was cash and gold.

There is little in markets he has not seen.  Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late-’50s through the ’90s. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974. He loaded up on bonds in the early 80’s when US Treasuries where yielding 18%.