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Ben Davies continues:


“On the other side we’ve got monetary inflation, and those two are trying to counter-balance each other to try and keep the coin spinning, in the middle, keeping upright.  It wavers one way, risk assets go off into credit deleveraging.  It flips the other way, markets surge again.


To enlighten on that is to go back to what happened in December.  I was very clear from my trip to Asia and the way I’ve perceived positioning in the market, that it was more likely we were going to have a post Christmas or certainly a December deleveraging.  


For me, watching the actual physical gold market, although the gold/silver ratio pushed out a little bit, I really felt the selling was all about gold, and silver was just a side participant.  Watching the market, it was one seller.  I’m not going to name names, but I suspect it was a very large fund that’s had a very bad year.  Everyone knows who it is (Paulson)....


Continue reading the Ben Davies interview below...




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“His gate was up for allowing redemptions and I suspect there were significant redemptions.  So there was selling of the GLD, or certainly there was selling in other parts of the gold market, in order to unwind the collapse in his own fund.


So one seller in the market was pretty rigorous for the space of a week.  It was very obvious based on the sentiment indices we look at, these were some of the best risk/reward sentiment levels that we’ve ever seen.  Probably the best seen since the 2008 level, and actually I would say they were arguably better in silver.


If I would have been an investor I’d probably have taken more risk in silver, which is what we did.  We bought some call spreads, in the market, to add to our long silver position.  We got long, actually, on the very last day of the year when the market gave us our buy signals.  The market, as of yet, hasn’t told us to be out and so we are still over-invested in the market.


In terms of calling for prices, I think we had a great call (last year).  We called for a $400 or $500 rally in the market.  We got it, almost to the $2,000 level that we asked for.  


My only criticism of myself is I hung on to the belief that despite the central bank intervention in the market, I thought with all of the currency proliferation it would be enough to offset the deleveraging and spur gold to a nominal new high.  That didn’t happen.


I would say that (with gold) coming in $1,570 at the start of the year, you would have to believe the market had more upside.  But people aren’t really invested and the market is rising on this monetary asset growth.  It’s really inflation that’s driving this, underpinning the market. 


The danger here is that people (who especially run funds) feel they are missing this rally and they start to pile in.  I would say I’m looking for the $1,700 - $1,720 level before I’d even think about reducing.”


In this interview Davies covered gold, silver, the mining shares and what fundamentals are driving assets in 2012.  The KWN audio interview with Ben Davies will be available shortly and you can listen to it by CLICKING HERE. 


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


Eric King

KingWorldNews.com

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