Gold and silver Open Interest remain collapsed as war rages in crude oil countries.
Within hours a second audio interview will be released! Alasdair Macleod’s latest audio interview has just been released! (LINK BELOW). But first…
October 2 (King World News) – Alasdair Macleod: While paper markets continue to suppress gold and silver, physical demand from China and others “in the know” continues, absorbing physical liquidity.
In recent weeks, open interest on Comex gold and silver contracts has struggled higher but is still close to deeply oversold territory. This reflects speculators putting just a toe in the water. Using their language, they are yet to be fully convinced that the debasement trade is on, so they believe gold and silver are vulnerable to rising bond yields. Hence, the opportunity for market makers and bullion bank trading desks to cover shorts and attempt to build neutral to long positions. But open interest tells us that this shakeout has its limitations:
As a measure of an oversold market, open interest is still struggling to rise above the extreme levels at the end of the 2011—2015 bear market. The fact that market makers have been trying hard to close their bears and go long tells us that they expect prices to rise from here and need to be positioned accordingly.
To confirm the bullish thesis, deliveries on the October contract expiry rose sharply: 11,465 gold contracts representing 35.66 tonnes, and 2,125 silver contracts representing 330.47 tonnes. So far, in 2026 600.6 tonnes of gold and 9,000.65 tonnes of silver have stood for delivery. Furthermore, China’s customs data records 1,141 tonnes of gold imported by end-August and there’s a further 80 tonnes of monetary gold added to the PBOC’s official reserves.
To summarise, while Western retail demand is virtually non-existent, China and other Asian nations are using the opportunity to get out of the dollar and into gold in huge quantities. Who is right: the big money from central banks downwards, or the little people who have a record of buying at the top and selling at the bottom?
We will leave that question hanging and move our attention to bonds. All bond markets are in crisis with yields rising to levels exposing the bankruptcy of the dollar-based fiat currency system. The 10-year US treasury note yield has risen by 1.25% since February breaking new high ground last seen 25 years ago:
In 2001, US debt to GDP was 54%: today it is about 120%, pushing the interest bill rapidly higher. Now that the consequences of the US/Israeli war against Iran are set to drive the global economy into a slump with higher energy prices and food prices, the purchasing power of the dollar along with other G7 currencies is expected to decline at an accelerating rate. That is why China and other Asians are selling dollars for gold.
In another headwind for gold, the dollar’s trade weighted index has rallied mainly due to weakness in the euro brought about by concerns over France’s debts, its bond yields having soared recently:
Meanwhile, there appears to be a campaign telling us that Hormuz is open and crude oil shipments are back to normal. Goldman Sachs even claims that shipments are at 98% of pre-conflict levels. This doesn’t square with the data of ships transiting the straights:
The seven-day average stands at 59% of the pre-war normal. The shipping that’s getting through is with the permission of Iran’s IRGC having paid the exit fees. Those that try to run it are attacked by drones. And the East-West Saudi pipeline to Yanbu on the Red Sea was closed by Iraqi-based attacks, and even though the Saudis claimed it would only take a week to fix, tankers delivering to Asian markets have to navigate the Bab el Mandab strait controlled by the Houthis.
The oil situation is extremely volatile, with spot prices for Brent currently $120 — the headline price of $100 is for one month delivery on a backwardation curve falling to $82 one-year out.
There is growing conflict between governments over diesel, with the US accusing the EU of hoarding and threatening to cut its exports. This is part of a growing trend as everyone tries to hang onto their reserves, starving global markets of international supplies.
Putting it all together, the debasement trade appears to be the way forward, in which case when it gathers pace, availability of bullion is likely to be limited. That being the case, higher bond yields and oil prices will lead to higher gold prices, just as they did in December 1973—April 1974 when gold doubled. To listen to Alasdair Macleod discuss gold, silver, miners, oil and more CLICK HERE OR ON THE IMAGE BELOW.
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