KITCO GOLD FORUM
1997-1999

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Date: Fri Aug 21 1998 21:26
ERLE (farfel, ) ID#190411:
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I just read your posts of yesterday, and they are thought provoking.

I'm with TYoung on this hesitancy toward goldstocks and physical. It just seems weird that TVX and other companies share prices continue to fall with any news that would have propelled them skyward in the past.

I don't see the unremittingly rotten news that smashed POG in the last year. I also do not see why there should be any positive correlation of POG with the Yen.

Yet nothing happens. Oh well, I'll just take a number and sit down to wait.

I suppose you saw Cooljings Cinton does farfel

IDCI ( lying ) M.

I don't care I'm lying more!-

Date: Fri Aug 21 1998 00:54
farfel (XAU Call Options Purchase... Gold Mining Stocks About to Shine?) ID#17077:
Copyright © 1998 farfel/Kitco Inc. All rights reserved
Although several K-1 posters and Steve Kaplan himself have voiced the opinion that a huge purchase of XAU calls is a bearish sign for the XAU, I would humbly suggest they are mistaken for several key reasons:

1 ) Based upon my many years experience playing the options market, the players that stand the most chance of success are the ones that open a position versus those that climb on board an existent heavy volume position. In other words, rewards arrive to those investors who have the courage of their convictions and sense a developing trend BEFORE the crowd who usually get on board too late. With options, timing is everything and getting on board too late means holding a strike price that is too far away from the stock's realized price upon expiry day.

2 ) Although the common perception in the options market is that the pros ( or big players ) write the options while the little guys play them, yesterday's huge purchase of XAU calls is clearly a pro action ( and I would wager even further is an insider action ) . Now, admittedly it would take big players to write the calls. So, essentially, I would guess that the XAU call position is a notable square-off between either major XAU shareholders or major XAU naked short speculators versus another major long speculator.

If the long speculator turns out to be a George Soros-type or a proxy acting on behalf of someone like that, then there is every reason to believe that the call buyer is the one in the know.. NOT the writers of the calls.

Unfortunately, Kaplan often errs in automatically assuming that all commerical players ( or the options writers ) are always right. Gold's past performance over the last two years has proven to be a case of commercials ( WRONG ) and Speculators ( RIGHT ) .

If a major speculator/consortium with tremendous purchasing power has turned into a goldbug overnight, then potentially we might be ready to witness a pleasant little anomaly...one in which the specs lead the way in the establishment of an XAU Bull rather than the commercials. I believe we are about to witness a major long gold spec action ( What an interesting coincidence that 100,000 ounces of COMEX gold left the inventory the other day ) .

As I theorized often in the past, I believe that the establishment of the Gold Bull will NOT initially be recognized by most major goldbugs. Rather, it will surprise them with its sudden unexpected force.

In such a scenario, then one would expect that many commercials or professionals will NOT reap the full benefit of the incipient Gold Bull.

In other words, they may be hedging their bets via antithetical positions: long the physical gold and short the gold mining equities...a hedge that could backfire if both the physical and XAU blast off together with the same powerful force. Yet, even if such a hedge backfires, ultimately, on a net basis, I would expect the XAU companies will end up winners.

Thanks.

F*

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