Bullion banks and hedge funds are making moves in the gold and silver markets.

March 19 (King World News) – Alasdair Macleod out of London:  Tonight’s Commitment of Traders report for last Thursday is a surprise. First, we see that the Swaps (bullion banks) are beginning to lose the battle to close their short positions, and the Producers/Merchants have reduced their net shorts. But the big surprise is the Managed Money category (hedge funds) which has gone net long 11,691 contracts. Other Reporteds and Non Reporteds have cut their net longs, in effect supplying the hedge funds.

One would have thought that the Managed Money category would not be buying gold contracts at a time when bond yields along the curve are rising, because this category normally sells gold futures for dollars in these conditions…

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But the next chart shows that they have a long way to go if they continue buying before they are in overbought territory (ie above the dotted line).

Open interest is bottoming out, which with a steadier gold price indicates a base for a bullish move is forming. Open Interest is our next chart.

At 475,979 contracts, Open Interest is showing signs of falling no further. That being the case, the bullion banks face renewed difficulties. Our next chart is of their money position.

The gross short position is $34bn, net $23bn. This is still painful but will be nothing compared with the pain to come if the hedge funds continue to buy, despite the rise in bond yields. That is our last chart.

This is a significant and rapid rise for the 10-year US Treasury bond yield. It indicates growing fears of price inflation, which all the big banks are now talking about. That must be why the hedge funds are buying gold contracts.

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