Speaking of Golden Minerals, which is still my largest share position, there is no longer any doubt in my mind there are malign forces out there bent on keeping this share price going from where it ought to. This is probably the case in many of the gold/silver shares, which is why they have acted so poorly for so long.

What happened today blew me away and convinced me what the extent of this short selling of the precious metals shares really is. Let me explain.

Last year Golden Minerals merged with ECU Silver on a 20 to 1 basis, or one share of GM for 20 ECU shares. During the debacle of the last few months of the year, GM was taken down to $5.23, which was the equivalent of 26 cents ECU, a total disaster for any of us who invested in them a decade+ ago at the same price or more. During the downturn over the past couple of years, there were a couple of visible short sellers trashing ECU publicly and making a big deal what a short it was. For whatever the reason they've won out thus far. That’s the way it has been.

However, during the month of January GM has stormed back, still rinky-dink in terms of ECU of old, but still quite an impressive performance, rising all the way to $9.55 this morning. Technically it achieved a major breakout. When, out of nowhere it began to collapse today with the HUI up 10, gold flying, and silver sharply higher. It was clobbered down to $8.78, down 57 cents on the day. We contacted the company to find out if there was any news out, or was there any announcement of insider selling? The answer was no.

What I did learn was that as of January 13 there were still 2,343,799 shorts still on the books. That is the official number. Our guess is that the real number is double that. Today’s action suggests the shorts are not throwing in the towel yet, even with the dramatic inflation announcement by the Fed which ought to send gold and silver shares soaring in the months ahead.

It is my bet that these bums have overstayed their welcome at the party and are going to get blown out over those months. It couldn’t happen to a creepier bunch of fellows. It is also my bet that GM is going to $90 per share when silver soars toward $100 per ounce.. That might sound like a stretch, but it is only a triple from GM’s old high … which is only a ten bagger from here, a move that will be commonplace in the years ahead when the gold/silver share mania kicks in. It is only a question of time before the shorts in GM, and in a number of other precious metals shares, cry "UNCLE." It is only a question at what price they surrender.

What the heck? I wrote the above with GM below $9 per share. It is now unchanged at $9.35. I asked my friend Wistar Holt if he knew what was going on. He came back with:

As of 12:00 CST, AUMN has made a 180 degree turn and is unch at $9.35 on 300M shares.

With gold/silver prices fairly stable over the past 1-2 hours, I can only ascertain three possibilities to this bizarre trading:

1. An ignorant institution bailing the stock recklessly—he won’t be employed long!

2. A brokerage firm haphazardly liquidating a margin call of an institutional client.

3. A short protecting the already-existing 2.3 million share short position and preventing the stock from closing above a technical level of 9.40, as well as an effort to push it below the benchmark $9 level. Then, buying/covering the new shorts placed earlier once the stock began to recover from the $8.78 low. If this is the case, it has only required 50,000 shares to fully recover the loss and the short might be even further exposed.
Wistar

GM closed at $9.16, below its breakout point.