Its funny how trades go from lonely to crowded.
I first mentioned Gold positively in a client note in December 2002; I subsequently became more enthused about gold in early 2005.
While still net long Gold, I mentioned that I initiated a short postion in GLD as a technical trade. Given its overbought and crowded status, I wouldn’t be surprised to see it pull back toward $500.
The initial Gold call was met with a chrirping crickets; The subsequent call was met with yawns. Aside from all the criticisms about Gold Bugs and Tinfoil hats, its funny how people NOW have finally caught up to the gold viewpoint. When I mentioned the short on K&Co. last week, my inbox was filled with derisive snorts. Short Gold? Are you mad? Its going to $1,800!!!
Ironically, the same pattern played out with Oil: I liked it since December 2003, but once it crossed $60, the call went out for $100 oil!
Crowded is the correct word.
Here’s the WSJ’s recent take on Gold:
"With gold prices near 25-year highs, more investors are searching for stocks that could benefit if the surge continues, such as shares of small and midsize gold producers that haven’t advanced as much as those of larger gold companies.
Many of these smaller mining companies are known as risky bets, because of high production costs and, in some cases, challenging pasts. That makes it a more difficult game for investors, though one with a potential big upside if gold stays at these high levels."
click for larger chart
Prospecting for Mining’s Winners
If Gold Prices Maintain Heights, Even Less-Efficient Small Firms May Offer Benefits to Investors
THE WALL STREET JOURNAL, January 27, 2006; Page C1
Special GOLD focus — December 13 2002Comments