Dust Weekly

The one notable positive development in the gold mining sector is the ongoing collapse of DUST, the short ETF of gold miners.

If anything during a gold bull market, it should be short selling of gold miners that aught be taking losses, not gold miners.

But regulators have seen to it to remove every last restriction to apply derivative formulae and selling into the down tick. Why every last safety measure would be removed is an open question, especially since they were meant to protect brokers from aggressively stampeding into wholesale risk.

But perhaps the banks need to sell off their soon-to-be illiquid derivatives to somebody. Certainly you would not have retailers buying in to this kind of a position.

http://scharts.co/1agEf3f

GBN.V Weekly

If I didn't know any better, I would say that there was probably a third long strangle equity swap derivative strategy in place over GBN.V shares since 1998 - 2002. All gold miners rose in 2002 quite spectacularily. GBN.V was range-bound after that, and finally succumbed to a bear market against the $U.S. gold price starting in 2006, and terminating in 2013.

I don't think the strategy of buying into GBN.V shares is incorrect, as the gold bull market will continue, and the assets here have obvious merit. But the fundamentals don't matter at all, since the entirety of financial interest in the sector is on the short side. Even Netolitzky, the managing director, is in on the game.

There was a buyer on Friday before last, and managed to establish a hedge-fund size position with a mere $9k invested. A minor panic ensued, where share prices were caught with a weekly close @3.5¢. This changes the technicals for the better, as I believe a buy-in is set to occur. How long this might take is an open question.

But offerring that many shares all at once was pulled immediately right after, though this has somewhat resumed.

http://scharts.co/10YifJC

TLT Weekly

One stubborn aspect to the TLT is that the price refuses to decline below its pivot point where this has already occurred on the U.S. long dated treasury bond price.

It might have to wait for the third quarter, or October as options expiry for bonds is quarterly at the end of the month. GBN.V starts its third quarter fiscal 2014 in November, while the Long Strangle in vogue over GBN.V share prices expires in November.

It would appear a lay-up for TLT declines, thus advances in small gold mining shares. DUST was trading up on days when TLT advanced, regardless of whether gold or miners were up. So it would appear that DUST is merely part of the same hedging strategy as selling the miners and buying treasuries.

http://scharts.co/QbPCQ1

$Gold Weekly

The oft-quoted $1300/oz. figure by the media as a minimum all-in cost is about to be taken out.

Really, this all-in cost figure should be somewhat lower. Gold prices did not correct below $1179, and the inflation-adjusted all-in cost from 1997, which was $300/oz. is just below the correction value. $1135/oz is the inflation-adjusted figure, if you use the shadowstats option for 2012 calendar year. 2013 figures come out next year.

http://www.halfhill.com/inflation.html

The original technical report from the Komis deposit stated quite clearly that gold values below $300 required that the mine be shut down in 1997. They kept their secrets that way, and had only processed development grade muck before shutting down diluting results.

GBN.V is only processing development grade muck for the last year, and its been since February 2011 that we have no clear idea what grades in the mine are, what the processing rate is, where the company is in development. All secrets are being kept this same way, and that during the gold price correction, GBN.V is in virtual shut down.

As for gold prices, if assuming that a Volatility Smile derivative is in vogue over gold futures in the last year, which brought is a correction in price, then very highly likely bullion bank players massively selling their gold into the market during this correction were taken for their gold.

That would imply that competing global banks are now vying with one another in gold futures markets.

http://scharts.co/19Z24MI