us$934, page-35

JrowL, you say

"...gold has been bid up again into another bubble, but I guess you're like Greenspan, it's impossible to spot a bubble. Gold stocks going to smashed again, of course people will say IMPOSSIBLE, just look at who is buying gold, nobody else other than hedge funds."

Here is a chart courtesy of Bill Murphy showing the relationship between gold price and open interest on the COMEX.



Open interest is increasing this decade as more speculators are attracted to the rising gold price. However, from July 2008 these speculators (mainly hedge funds) closed 540 tonnes of long paper gold positions and open interest plunged in Nov08 to levels seen in 2003 when gold was $350-400. This behaviour on the COMEX was observed for other commodities too. However, the reason the gold price didn't collapse like all the others was the unprecedented levels of physical buying by retail investors in the second half of 08 (safe haven buying).

Now that the hedge fund selling is over and open interest is starting to rise again (indeed from a very low and more sustainable level) means the gold price can rise because the physical demand remains. Gold and the gold stocks could get smashed again, but it won't be the hedge funds. It will be the recent buyers of physical bullion. But I can't see these buyers selling YET before we either have 1) rising interest rates or 2) a sustained economic recovery. IMO, these won't happen for a few years so the bull market in gold will continue.

Rowingboat.