the end of the bull run for rms, page-45

Hi David
I have looked through some of your recent posts and am wondering why between August and September you changed your view from being bullish to being extremely bearish.

On 9 Aug you posted that you thought gold was going to hold its ground in this crash because this crash seems different than any other and that gold might correct to $1400. You used the assumption that gold was $1400 to estimates PBT for RMS of $140m and a RMS share price of $5.60. Since then you have suggested RMS will crash. What changed your mind?

Since August some of your postings have were:
1. RMS like every other company will crash.
If you are this pessimistic, why not sell all of your remaining shares including those you hold in RMS?

2. Gold has only been high because it is used as a safe investment and inflation hedge against a falling usd. And later, there are only four things that make the gold price rise. 1 Demand for the metal, 2 Lack of supply pushing up the price, 3 A Safe investment, 4 Inflation hedge
The price movements we have seen over the last week cannot be explained by any of these items. I therefore conclude that your reasons are naive and/or incomplete.

3. 50% of RMS share price could be a result of the high gold prices.
I think you need to define what you mean by high. Unlike other gold producers as you say yourself RMS would still be highly profitable even if the POG was $1400.

4. If this is a 87 style crash or worst gold could fall down to $700 mark
Anything is possible. I prefer to only consider those things that are likely to occur as I don’t find extreme possibilities useful

5. RMS is barely a producer
RMS will produce approx 140k ounces in the CFY, have revenues between $150m and $200m and earn between 25 and 40 cents per share. Not only is RMS a solid producer it is a strong and profitable company by any standards.

6. When gold has lost its usefullness as an inflation hedge the market dumps gold very quickly
My recollection is that there was a period in history when the POG was positively correlated to inflation but this has not been the case for a decade. What is your source for this assertion?

7. I think RMS will be punished by a fall in the gold price because manny investors are relying on bumper profits from extremely high gold prices.
I think it is unwise to assume you understand the motivations of many investors.

8. Over the last two years governement have been continually manipulating the economy by making saving announcements.
I have never liked conspiracy theories such as this one.

9. The reseason there was a bounce back today is due to a perceived fix for Europe on the way.
On this point I partially agree with you. The market does seem overly optimistic about a bail out for Europe, especially as the Germans in particular haven’t agreed to anything significant yet. However, it does not follow that gold is about to fall into the abyss. It could as easily rise again as a safe haven.

10. The whole market sentiment today is based on fantasy.
Source?

11. I dont have much time for institutions or market sentiment
I think that if you look into things a little more deeply that the entire market can be attributed to actions by institutions and changing market sentiment. To disregard these essential elements of the market seems silly to me.

12. Gold isnt based on fundamental demand because the price has fallen very quickly.
I think the issue here is that we need to consider what the terms fundamental demand means. It seems pretty clear that a number of emotions are driving the demand for gold including the core market emotions of fear and greed.

I appreciated the small rise of 7p today.
K