It is clear that the big money in gold is 90% certain of QEIII being announced in the next month or two. If this indeed confirmed, then the gold price will really take off and we will most probably see the nominal high taken out. That will make us very happy on the one hand (our core positions will be worth significantly more than we paid for them). On the other hand, we will regret that we didn’t buy even more at lower prices. Oh well, if you are successful in investing you have to get used to that feeling. In any case, it’s much better then the regret that you bought too much at too high a price.
The flip side of the current situation is that if there in no QEIII announcement in the next couple of months, there will be a serious correction. On the one hand, this will good in that we will be able to continue accumulating gold and gold related securities at low prices (we are, after all, net purchasers of assets). On the other hand, it will be hard, psychologically, to see the chance of booking large profits disappear – it is good to be able to do this once in a while. For this reason, we have decided to open a protective leveraged short on the gold price. This small premium will be lost if there is no correction – in which case we won’t care very much. If, on the other hand, the gold price dramatically corrects – at least we will be able to book some profit and this will make it much easier to face lower prices.
We do what we need to do in order to stay with the program – buy weakness and sell strength and over the long time, increase asset levels and increase cash levels.