Rick Rule’s Reasons to Buy Gold and Select Gold Stocks
SOURCE:[Casey Research] – Jeff Clark: First, Rick, what’s your basic explanation as to why gold crashed a few weeks ago?
Rick Rule: I think there are two parts to the answer, maybe three. First, the gold market was technically weak. The second thing is that there were a lot of institutional players long gold on leverage, using capital that was borrowed rather than their own, so when the price crashed they had to unwind very rapidly.
The fact that there was a very large futures player who attempted to come out of the market all at once during a period in time when the market was extremely illiquid is, of course, also very suspect. I know that most Internet articles are focused on the one large 400-tonne sale at a very odd point in time, and I would certainly agree with the suspicion that if I were a holder of that size and I was looking to sell or had to sell, I probably wouldn’t have chosen to do it all at once or in a very illiquid time in the market.
I think that one of the things you have to look at in the gold market is that we are changing the nature of ownership, from institutional momentum holders who are leveraged, which is a long way of saying “weak hands,” to physical individual buyers on a global basis, which is a different way of saying “strong hands.” So one of the things that happened in the gold smackdown is that gold did what many things do in bear markets: it went from weak hands to strong hands.
Jeff: I saw a BNN video where you said the capitulation process isn’t over. What makes you say that?
Rick: I don’t know if I have an opinion regarding the capitulation process in gold and silver, but I certainly think that the lows are yet to come for the junior mining equities. My experience in 35 years in junior equity markets is that bull markets end in an upside blowout, and bear markets end in a downside puke. I think we were partway through that a couple weeks ago, but I think it got interrupted. I haven’t seen the sort of cataclysmic capitulation selling that usually marks a bear market bottom. It doesn’t mean that just because it has always happened that way that it will happen this way again, but I haven’t seen the capitulation selling. What I have seen, for example, is mutual funds being forced to sell to meet redemptions – but I haven’t seen the no-bid market that usually marks the cataclysmic bear market bottom.
Post from: Gold News from Gold Editor
Rick Rule’s Reasons to Buy Gold and Select Gold Stocks
The post Rick Rule’s Reasons to Buy Gold and Select Gold Stocks appeared first on Gold Editor.
Source: http://www.goldeditor.com/rick-rules-reasons-to-buy-gold-and-select-gold-stocks/
