Hedge funds slash bullish wagers on gold over Trump election win
Hedge funds and other large speculators boosted net-long positions by 11% to 197,362 as of Nov. 12, the lowest in 14 weeks.
A cull of weaker mining companies will allow the sector to bounce back healthier and stronger when the next bull market arrives, says L. Melman who dropped by MINING.com’s Vancouver office last month.
Melman publishes a newsletter called The Melman Report that looks at economic influences on the mining sector.
“So many companies have seen their share prices decline to the point where they can’t effectively raise capital through share offerings…if a company runs out of money, their projects eventually go back into the inventory of unclaimed properties.”
“Whenever this current metals softness ends, we’re going to have another rally – that’s almost inevitable. And when it does, anyone with money will be able to pick from this inventory of previously failed projects and I think they’re going to make immense profits…the only question is of timing.”
Gold
Short term, Melman is unsurprisingly concerned about bullion prices and miner shares and he thinks that newsletter writers are partly to blame.
“Writers like myself have been saying that if all these things happened [euro zone problems, aggressive quantitative easing, North Korean nuclear gamesmanship], gold would be driven higher.”
“All things things are happening and yet for most people in the world, they see the shares and gold going lower.. and I think that’s spreading degree of disillusionment among previous metals investors.”
“But in the long term I’m still convinced that substantial monetary creation, international security crises, political uncertainty, those things will all lead to future bull markets in gold, silver, platinum…the whole group.”
The commodities supercycle
Melman thinks that India and China but also Indonesia, Laos, Cambodia have a “tremendous amount of growth to go.”
“The number of people living in rural circumstances in India and China is enormous,” and the majority of these peoples will be drawn to cities in search of more lucrative employment.
“We’re not talking 5 or 10 million people, we’re talking hundreds of millions.”
Elusive growth in the developed world
Melman suggests that the key to economic growth in Canada, the United States and Europe is the reduction of government.
“I am admittedly a libertarian and I look at things from an Austrian and free market point of view. I think the biggest contribution governments can make is to reduce their impact on the entire commercial world.”
“We’ve just been saddened by Madame Thatcher passing away. That was her contention and Ronald Reagan’s as well. They really tried to control the scope of government and, what the hell, by 1982 something ignited the greatest securities bull market the world has ever seen and it lasted all the way to 2000.”
“I think ultimately that’s what we need: a dose of less government, less government spending, allowing people to keep more of their earnings, invest in commercial enterprises and I think we could turn the world around.”
“If this trend to bigger and bigger government and more and more intrusive government, then there could be some real dark clouds on the horizon.”
