The bullion banks are covering but remain uncomfortably short the gold market.

September 25 (King World News) – Alasdair Macleod:  “Reflecting a fall in open interest of 13,591 contracts from the previous COT report, the Swaps have reduced their net shorts by 14,383 contracts, and the Producers/Merchants by 7,224 for a total reduction of net shorts by 21,607 contracts. 

On the speculator side, Managed Money (hedge funds) reduced their longs by 24,378 contracts. The only category that went more net long was the Other Reporteds.

The bullion banks in the Swaps have been keen to reduce their exposure, and these figures reflect some success in this objective. The closing price on 21 September was $1774, and the price has now fallen to $1748 tonight. That suggests a bit more success for the Swaps closing their bears, but open interest rising by 5,272 contracts also suggests that Other Reporteds have added to their longs again. These are the guys who stand for delivery because the hedge funds are simply pairs traders. 

Our next chart shows the Swap’s monetary position, and the reduction of gross shorts to $42.2bn and $29.4 net of longs. An improvement, but these positions are still uncomfortable.

The tactic now is aimed not just at scaring out hedge funds trading on technicals, triggering stops as they go, but in London the bullion banks will be hoping to shake out weak holders in the ETFs. 

Watch out for establishment banks and fund managers warning that higher interest rates are on the way, and this makes gold expensive to hold. This analysis is downright incorrect because gold rises with higher interest rates, real and nominal, which was what we learned in the 1970s. 

I think we are close to the end of gold’s weakness because commodity prices, led by oil, are beginning to break out on the upside. This is our last chart. 

And finally, all markets are at extremes, including gold. Rising interest rates will collapse equities and bonds. More QE will be required to support financial markets, so forget tapering. On that basis, the dollar is toast and gold immensely cheap.

***To listen to Stephen Leeb discuss what to expect next in the gold and silver markets as well as a global game-changer CLICK HERE OR ON THE IMAGE BELOW.

***To listen to this timely audio interview about what is going to have a huge impact on the gold and silver markets going forward CLICK HERE OR ON THE IMAGE BELOW.

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