Gold Miners Get Media Attention

http://business.financialpost.com/2011/08/10/gold-finally-puts-shine-on-tsx/

Nobody will listen, but the ratios of gold mining indeces vs. gold have actually declined, and have been declining on a bender for a protracted period of time. The problem with gold mining companies is that to pay for everything they do, they issued shares. Unbelievable numbers of shares. Relentless dilution has led to a chronic undervaluation of even the largest cap gold mining companies. (which are, btw, turing into base metals miners - another aspect conveniently ignored)

The relentless dilution of gold company share floats that look like a shareholder swindle has been the achilles' heel of the sector. Should the gold price correct @$1880/oz. U.S. to the 13-week EMA, then these indeces will experience a turnaround vs. the gold price. What that might mean for GBN.V, the sell-side brokers who first sold tens of millions of GBN.V shares and then bet on higher gold prices will have to sell their GLD positions and buy back the GBN.V shares they sold.

I am also hearing that GLD is taking a record number of physical deliveries, this is much like a run on the bullion banks. The larger players are taking possession, while the smaller players continue to believe that the GLD backs them with physical. Its just a mechanism for bullion delivery in the end, not a safe deposit box.

supersize: http://www.flickr.com/photos/11747277@N07/6030445159/sizes/l/in/photostream/

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supersize: http://www.flickr.com/photos/11747277@N07/6031000850/sizes/l/in/photostream/

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-F6