Monday, April 11, 2011

Embry - I’m Amazed Hedge Funds are Short Mining Shares!

With gold at new all-time highs and silver at multi-decade highs, today King World News interviewed John Embry, Chief Investment Strategist at Sprott Asset Management. John Hathaway commented in his KWN interview, “I think these hedged funds (which are short mining shares) are going to get roasted.” When asked about Hathaway’s comments Embry replied, “I’m amazed that these guys would be short. I think these guys are bright guys, but I don’t know what they’re looking at. Why anyone would be short gold shares in the current environment is beyond my comprehension.”
April 7, 2011

When asked about his thoughts on the breakout in gold Embry remarked, “Well I’m thrilled actually, I mean we’ve been waiting for it for a long time. Since the beginning of the year the gold price has been aggressively controlled on either side of $1,400. I felt that we needed to get above $1,447 to see the next leg up which will take us through $1,500.

We got that action yesterday and today and it seems to be following through, so far so good. Chart looks great, now $1,440 is going to be support.”

When asked if this gold move will be significant to the upside Embry replied, “Well it’s going to be interesting because there are still a lot of people on the wrong side of the market. I mean at some point I think those that realize what’s going on are going to have to reverse these positions.

If you pile on short covering on top of more long buying, yeah I think this move could be big. I’ve seen targets of $1,650 on this leg. I think there will be a fight at $1,500. There always seems to be (a fight) at round numbers, but no I am very encouraged with where this is headed. I’m still a $2,000 (gold) guy by the end of the year so we’ve got lots of room.”

When asked if he thought John Hathaway was correct in predicting a quick move of a couple of hundred dollars to the upside now that gold has broken out Embry stated, “Absolutely, I totally agree with John Hathaway. I’ve enjoyed his work for the last ten, eleven years on the subject (gold), and in this instance I totally agree with his timing.”

When asked about silver specifically Embry remarked, “Well people still don’t get it, I see negative comments constantly, bubbles, you know the thing is extended, it’s going to get killed. Basically the supply demand for physical silver is so heavily in favor of higher prices that if it weren’t for the paper market, silver would probably be through $50 now.

You see the transactions on eBay for silver eagles, people are paying up to $50 or more per ounce for silver eagles on eBay. In reality this might be the real price for silver instead of this price that’s being manufactured on the Comex with all of the short selling that we’ve discussed. I think $50 on the official market, the Comex market, is probably coming up reasonably shortly.”

As the hedge funds move to cover their shorts in the mining shares, some of the moves will be breathtaking as many of these smaller quality producers and explorers go from dramatic undervaluation to overvaluation. This is all just part of a cycle. Definitely look for the mining shares to outperform the metals as this hedge is unwound.

The KWN interview with John Embry will be released shortly and you can listen to it by CLICKING HERE.

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