this weekend john doody spoke with jim puplava about the metals markets. the fed's balance sheet was of particular interest. six months ago, it was $900 billion, and on october 1 it was $1.5 trillion. they described the chart as looking like a hockey stick, but i disagree. it goes straight up like a rocket launch. under these circumstances, gold cannot be in a bear market.

puplava estimated it would take $2 trillion to recapitalize the banks, and another $2-3 trillion of fiscal spending to stimulate the economy, for a total of up to $5 trillion.

they also discussed the disconnect between the comex price of silver and the price of real silver. the owner of a private mint says johnson mathey owes him 1 million ounce of silver, and there will be a delay of 14-15 weeks for delivery. the comex short positions clearly do not represent commercial transactions. those are not mining companies selling forward their future production, certainly not at $11/oz.

in addition to the disparity between paper prices and real prices, there is another disconnect between the xau index and the price of gold. john doody reviewed prices going back to 1978, comparing the xau to the price of gold. he concluded that either the gold price will completely collapse, or the gold stocks are the greatest buying opportunity ever, as some shares are being priced as though gold is trading at $300.

the current price weakness may be caused by temporary factors like margin calls for hedge funds, or mutual funds receiving redemptions, but there are no huge stockpiles of commodities overhanging the market, or anything that would suggest the bull market in commodities is over.