Gold Bulletin

September 24, 1999

The gold market has bottomed! We are in the early stages of a short squeeze. The short interest was hoping that the gold market would collapse after the recent UK gold auction, as it did in early July. However, the bids were strong and the market traded higher. In the minds of the shorts, this might have been their last hope to get out. I estimate the speculative short interest in the New York macro hedge funds alone to be at least 1000 tons and possibly 75% more. As I just wrote in The Golden Pyramid, there will be no easy way out for these speculators because there is simply no physical gold with which to cover. The pool of liquidity supplied by central bank leasing is frozen until well into the new year.

Meanwhile, the stock market appears to be entering a bear phase, with a confirmed Dow Theory sell signal achieved yesterday. Look for a painful time for run of the mill equities. Gold and gold shares should begin to attract investment demand at the same time shorts are unable to cover. The situation has the makings of a huge rally.

John Hathaway