Today whistleblower and London metals trader Andrew Maguire warned King World News that a gold and silver tsunami is forming as the shorts are now going to get destroyed.
On the heels of the historic trading action in gold and silver, Andrew Maguire is giving KWN readers around the world access to his Weekly Commentary that has just been released to his subscribers.
By Andrew Maguire – Andrew Maguire Gold Trading Service
July 25 – (King World News) – I will start this week’s commentary with a summary of the week’s extraordinary action and defer catching up on some exceptionally good member questions to early next week. During the week, in our live sessions, we have looked in granular detail at the footprints that lead into and out of the gold raid that commenced in the early hours of Monday morning and how China was going to be falsely blamed for the selloff (which it subsequently was), yet an analysis of the footprints leads directly to the BIS (Bank for International Settlements) desk….
Continue reading the Andrew Maguire piece below…
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I draw this conclusion because, unusually, the selloff commenced in the OTC (over-the-counter) FX gold market, which concurrently picked up in the Comex tripping off market halts just before China sold. What is missed by all the commentary out there is that while the Comex was halted, the OTC markets continued to operate unencumbered.
BIS / Insider Activity Ramps Up In Gold And Silver Markets
I have provided analysis of this insider favored setup in prior commentaries, illustrating how this puts US-centric traders at a distinct disadvantage to the BB's (Bullion Banks) /BIS and all other global players who can continue to trade/hedge in the spot markets in any size while the futures and options markets are frozen. The concurrent OTC (over-the-counter) FX Gold action around these market halts were not picked up by any commentator/analyst and strongly point to BIS/Insider LBMA Bullion Bank activity.
We are quite used to thin market raids, sometimes suggesting official and other times the usual suspect Eastern European outfit operating in the COMEX market, (which I have reported to the CFTC as likely having an association with at least one market-making LBMA Bullion Bank), but this raid was extraordinary in several respects. Never before have we evidenced a permanently & deeply backwardated futures market print a flash $7.37 PREMIUM to the much larger physically related unallocated spot OTC markets. Also, one only has to look at the tiny GCQ5 (August Gold Futures Contract) volume it required to take gold down a full $50. Only some 7,500 lots traded in the Open Interest exchange BUT 1⁄2 of these flash orders were buys.
Quite clearly, the OTC markets were utilized to bridge through the CME market halts and ensure that the highly visible targeted longstanding multi-year Comex long stops were cleaned out. Immediately after the flash order, the spot markets reverted to trading back at a premium to not just front month August futures but between 50-90c premiums to December. These premiums are now embedded and deepened and UN-ARBITRAGED into Friday. This is a bullish condition not seen since the lows of 2008, in fact, far more so than at any time in memory. Vend in the historic naked short spec position with COT’s (Commercial Traders) 1/1 on the long side of this deeply oversold structural imbalance and all there is left to propel gold lower is the residual chart-painted historic bearish sentiment.
This is not enough in the face of unseasonable physical market bargain hunting ignited in the Middle East, China, and India. This is evident in the UNLEVERAGED physical markets, which have a lagging effect but, as in every synthetically driven market bottom, will backwash against the LEVERAGED paper market. This is imminent and could have occurred on Friday.
Historic Short Squeeze Now At Hand
SI (Silver Futures Contract) had not cooperated with GC (Gold Contract) driven selling and was holding up well throughout the week. In fact, it had closed its small gap within hours on Monday, exceeded it and then refused to stay down. This made it difficult for GC (Gold Contract) shorts to maintain traction and, with such deeply oversold conditions, risked a loss of momentum and the danger of a reversal. Given that momo’s /speculators have used profits to fund fresh short lots, this places heavily margined short stops at very low vulnerable levels, exposing a series of gaps.
On Friday, SI (Silver Futures Contract) was targeted by algorithms forcing a final capitulative flush to clean out residual multiyear long stops below Mondays $1,080 GC (Gold Contract) low and very strong $14.50 SI (Silver Futures Contract) support. It looked to me like the final flush and most certainly a massive bargain picked up in large tonnage size in both silver and gold on our physical wholesale platforms. ABX, (Allocated Bullion Exchange) is not officially launched yet but we are already picking up good size wholesale demand ahead of the official launch, especially in silver 100oz bars.
To sum up, by early Friday afternoon, with GC (Gold Contract) being continually capped at the 1080 level, the following unedited post before the Friday ramp pretty much sums up the week's capitulative action. Note the unprecedented backwardations that clearly evidence the LBMA is on its heels.
My Friday 2.29pm BST Note To Subscribers:
“Cobasis and backwardations are at extremes. December futures are now oscillating between at an unprecedented UN-ARBITRAGED 55c to 90c. Premium to cash unallocated gold, much higher to allocated, furthermore the December low was $3.17 below the cash market low. There is zero doubt COT’s are covering into all capitulations and taking 100% of the long side of all short sales. Also OI has shrunk by 22,600 lots Friday through Wednesday lots despite large size fresh spec short additions. We have seen nothing like this since 2008 capitulation point.
BB’s will commence the rinse once bubble territory spec shorting wanes. Already seeing large wholesale restocking related to Middle Eastern through India and China demand plus sovereigns soaking up all GLD and ETF redemptions. Unleveraged physical has a lagging effect on leveraged futures selling but in these unprecedented conditions the PM’s are so close to a bottom the risk is to the shorts. VERY close to bubble-like capitulation, if not already achieved. Note COMEX silver and gold additions while ETF’s capitulate into sovereign hands. China is surreptitiously accumulating reserves.”
Options sweet spots are also evidencing COT bullish footprints. As noted this week, the put selling appears to be largely in the hands of spec and Managed Money sellers. This places market making COT’s (Commercial Traders) on the long side of these bets. This is an inverse situation to longs selling calls and protecting these strikes, (from a close above). As of Friday, the GC (Gold Contract) sweet spot was still around $1,150 and SI (Silver Contract at $15.50, so interesting opex structures into Tuesday.
Increased Bullion Bank And MSM Gold Bashing As PM Markets Ready To Turn
The evidence is all there and goes directly against the Bullion Bank and Mainstream Media calls for lower and lower prices, (yes you, Jeff Currie, and the usual crew), just as they did at every capitulative bottom. Painting bearish sentiment is the last phase of a centrally planned rigged selloff. The COT’s are BUYERS. However, by driving sentiment down to the lowest at any point in history, they have managed to trick many dip buyers to stand aside waiting for the all-hallowed $700-$1000 levels. Trying to bottom-fish with risk reward, clearly favoring the upside is, IMO, just how $9 silver and $700 gold was missed in 2008 while the usual sirens called for $250 gold and $5 silver back then, while they were rinsing out clients'/muppets' pockets.
Once price rebounds, these side-line buyers will get on-board fearing missing the rally but it will be some $100-$150 higher and given the Open Interest structure and well-placed commercials, only then will Commercial Traders seek to hedge against them. This wash-and-rinse structure only differs by the scale of the extended short Open Interest in weak hands. The polar opposite of when naked spec longs were pushing $49 silver and $1,900 Gold and discussed two weeks ago, SI (Silver Futures Contract) had reached a point some 50,000 lots of spec Open Interest further extended, (7,700 tonnes!) than it was at the naked long $49 highs.
Right now, insiders are avoiding spooking the momo’s while momo’s still have the short bit between their teeth but are equally aware these weak naked hands have averaged in shorts using profits to expand their short positions. This leaves enormous short stops at very low-hanging levels and raises the risk level of a bottleneck short covering exit, which would see historically high paper naked short positions rapidly turn into margin calls when there are no sellers to cover into.
A Gold And Silver Tsunami Is Forming
The LBMA Bullion Banks, of course, are having the advantage of trading COMEX halts through the OTC markets while hot money specs get hung out to dry. When this large short position is unwound, it will not be orderly, most definitely triggering market halts and gaps higher. Such are the broken paper markets but something big is coming that will end these games — this I am certain of. I wish I could share some bullish news with you re the ABX but please be assured, when the surprise launch comes, it will have instruments and conduits that will disrupt the rehypothecated paper markets. With the season almost upon us, a PM tsunami is forming.
By connecting the dots between the deliberately stale, dated COT reports, we get almost exact confirmation of the structural footprints we observed between reports, namely COT’s are going long and tricking specs to go short. A very bullish setup indeed.
In GC (Gold Contract), during a week where Open Interest decreased by 2,904 lots to 459,760 lots, the main manipulation culprits, the Swap Dealers, (GS, CITI, etc.), as of cutoff, despite some additions into Tuesday, had increased last week’s net LONG 3,574 position to 18,219 lots. In last week’s COT report, I had estimated that after last week’s cutoff, subsequent Swap Dealers footprints….
“This time I estimate a very large addition to their net long position of an additional 12- 14,000 lots.”
This proved out to be almost on the nose as 14,645 lots were confirmed on Tuesday. This week, into Friday, I estimate a further Swap Dealer addition of at least 6-8K lots.
Conversely, and just as expected, Managed Money continued to take the short side, adding to last week’s fresh net short position by another very large 12,433 lots, leaving them NET SHORT 13,556 Lots. For context, they were 153,237 lots net long on Jan 27th. That is a swap of 518.8 tonnes long to short. Bear in mind, this hot money group has zero physical to back up longs or shorts. Last week, I estimated… “Since the COT cutoff, they were tricked further net short at least 1-1 by at least an additional 12K lots. Bear in mind, this speculative hot money owns no metal.” These post-cutoff footprints ended up very close at 12,433 lots further net short. Into Friday, I estimate this net short position expanded by at least 5-7K lots.
Producer Merchants also continued to reduce their net short positions by another large 12,240 lots from 52,043 lots to 39,803 lots. As noted over the last few months, this group is attempting to slowly reduce their deeply under-water proprietary positions.
Other reportables decreased their net long positions by a large 7,112 lots from 48,947 lots to 41,835 lots.
In SI (Silver futures contract), the same actors' footprints are much more visible. During a week when Open Interest increased by another 4,510 lots, the usually bearish swap dealers continued to add to their fresh net long positions by another 3,367 lots, bringing their NET LONG position to 3,962 lots. As noted last week, Open Interest was declining and showing signs of exhaustion. However, this week’s additions were down to the specs/hot money adding short supply. This structural setup is about as bullish as it can get.
Conversely, Managed Money increased their NET SHORT positions by 5,753 raising their net short positions from 8,998 lots to 14,751 lots. To provide context, in January this group was net long 41,722 lots, a difference long to short of a ludicrously large 8,782 tonnes. Since the cutoff and into Friday, best estimate, this hot money group added at least an additional 2500-3500 short lots, however last week, I had underestimated Managed Money’s short additions, estimating 3-4K, this turned out to be 5,753 lots.
Producer Merchants decreased their net short position from 16,184 lots to 15,129 lots. However, given the physical silver market is being cornered by the primary Bullion Banks, the bulk of the cover was likely related to legitimate hedging. The primary Bullion Banks are sitting on a good size physical long position and IMO this reflects the bulk of a hedged portion yet to be covered.
Other Reportables added a small 445 lots to their net long position to 18,996 lots.
We Are Now At A Point Of Inflection
Obviously, both GC (Gold Contract) and SI (Silver Contract) have endured some major chart damage but as noted above, the Open Interest structure, cobasis, and un-arbitraged backwardations are at extremes, while the physical market is on fire at these levels forcing COT’s long. We are at a point of inflection and on Monday, I will be looking for longs, buy stops, etc. I will update all levels in the London Calling video shortly. Regards, Andrew ***To sign-up for Andrew Maguire's incredible gold and silver trading service CLICK HERE or email King World News for more information.
***Eric Sprott's remarkable audio interview has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW. The written interview only contains a tiny portion of what Sprott had to say in his outstanding audio interview. Sprott discusses the greatest danger facing the world today, the coming financial carnage, what he is doing with his own money right now, the gold and silver markets, what surprises to expect this year and much more.
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