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The London Trader continues:

“The commercials have been covering their short positions and the local traders are all short at this point.  All of the guys who were long and vulnerable at the highs, are now short and vulnerable and this exactly what we need to make a bottom.

These momentum traders ran into a very large sovereign order near the $1,680 area.  When gold broke through $1,680 there were layered physical orders.  Over 40 tons of physical gold were filled below $1,680....

Continue reading the London Trader interview below...


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“These physical orders increase exponentially in size going all the way down to $1,650.  The bullion banks know that these orders are down there, but obviously it’s all about where the lines cross.  So, as I said, these bullion banks are covering like crazy right now.

These high frequency traders and locals are so lopsided short at this point that they are just being used by the commercials.  So, not only are the commercials heavily covering short positions, but the actual amount of paper tonnage that was converted to actual physical on that dip yesterday is significant.

Some of it, no doubt, is to pay for some of the leases that were underwater from the bullion banks.  A big chunk of it though, is physical metal that is going to disappear to Eastern vaults.

What’s also happened is a lot of the spot buyers, who have not converted to physical yet, have indexed themselves to spot and are now converting those spot contracts in to physical and will continue to do so for the next three to five days.  So these paper raids have an enormous impact on the underlying physical market.

This morning on the am fix in London, a very large number of spot indexed buyers converted to physical.  At the pm fix today in London, a very large number also converted to physical.  What is happening over here in the physical market in London is totally missed by the US centric short-term day traders.

Right now the high frequency traders are doing all of the work for these guys (commercials).  Paper is being converted into physical.  This is being done by the bullion banks covering shorts and also very strong physical buyers accumulating at these levels.

Anyone in the know is accumulating physical and the shorts are just pressing down on a spring here.  It’s like anything with leverage, once it unwinds, it unwinds rapidly.  We saw that on the top end and we will see it from the bottom end.  The shorts now face larger and larger sovereign orders for physical metal to get the price lower.

You have to remember the bullion banks are naked short the gold and silver markets and they are losing the very ammunition they need to manipulate price.  They have to be careful not to lose more on the physical market than they profit on the paper market.

What these sovereign entities are doing to take metal from the physical market is they are buying on the spot market on dips, quietly accumulating spot, on the long side.  Then, on dips in premiums, they are converting that into physical gold and that has a lagging effect under the market that is yet to feed through.   

During this entire takedown in the gold market there has been absolutely no selling of physical gold, only accumulation.  You see people saying gold is headed to $1,620, $1,600, $1,500.  I guarantee you these individuals do not know what’s going on in the physical market.”

The London Trader also added: “There is a massive fight going on and if we hold above the 200 day moving average for a COMEX close (the virtual market), the bottom is in.  Commercials would rather cover shorts below the 200 day moving average.  These high frequency traders and weak handed traders are now selling.  The fact is they are being used by the bullion banks so the bullion banks can cover their short positions.”

There will be a second portion of the London Trader interview released later today regarding the silver market.  This interview discusses exactly what is taking place in that market and how it will impact gold.

© 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

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