Yesterday King World News reported that a major swap dealer, who is heavily upside down on short positions in the gold market, is now in trouble. KWN then posed the following question:
If the price of gold continues to surge, will some of the entities who are over-exposed short the gold market go insolvent? Or will the price of gold be brought down so the troubled shorts can regroup?
And today, all the sudden…
Well, some price capping in the gold market has been quite apparent in the last couple of trading sessions, but today it was reported that $5 billion of panicked paper gold futures selling occurred right after the physical market closed in London. But what really happened? Was it really panic or something else?
BIS Intervention In Gold Market To Aid Battered Gold Shorts
In fact, this was the Bank for International Settlements (BIS) intervening in the gold market to assist the battered commercial and swap dealer shorts. What has taken place in the gold market has indeed been historic. Commercials banks (acting as agents for the Federal Reserve) have been aggressively shorting the gold market at all-time record levels. But the Fed and the commercial banks did not anticipate that global demand for gold would skyrocket the way it has…
Investment Demand For Gold Skyrockets To All-Time Highs!
Gold has already surged more than 25 percent in 2016, and investment demand has been soaring, as sales of gold coins from the U.S. Mint have now soared a jaw-dropping 84 percent. In fact, investment demand for gold has now surpassed jewelry demand for the first time in history.
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Investment Demand For Gold Is Global
But it’s not just investment demand from the United States. With negative interest rates picking up steam in Europe, many Europeans have been flocking to the safety of gold, especially in light of the dangers of holding capital inside the fragile European banking system.
End Of Mid-Cycle Correction Spells Trouble For Gold Bears
It is quite clear that after completing an extended mid-cycle correction (similar to the 1970s, although longer in duration), gold has now entered the second leg of its historic secular bull market and is headed to new all-time highs. During these bullish advances, the Federal Reserve and their agent bullion banks fight a war of slow, and sometimes not-so-slow, retreat.
The question now becomes: Will the BIS halt the advance in the gold market and drive the price significantly lower to allow the battered commercial and swap dealer shorts to regroup? Or, If the price of gold continues to surge, will some of the entities (swap dealers) who are over-exposed short the gold market go insolvent?
A Nightmare For The Gold Bears
The bottom line is that the massive physical demand for gold has been a nightmare for the gold shorts up to now. It will be very interesting to see how the price of gold trades in the days and weeks to come. Summer is normally a time where the precious metals markets take a breather. Could this be the August that surprises the gold bears and torches the shorts? Only time will tell.
***KWN has now released the incredible audio interview with Rick Rule, where he discusses what investors should be doing with their money and their accounts right now, the gold and silver markets and much more CLICK HERE OR ON THE IMAGE BELOW.
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