China and Russia are making major moves in the gold market.
May 28 (King World News) – Alasdair Macleod: In tonight’s Commitment of Traders’ report the big increase in short positions was in the producer/merchant category, which is somewhat counterintuitive. Why would mines hedge their production when the refiners are screaming for product, the gold price is rising, and at these price levels there is less pressure on mine managers to secure cash flow?
Perhaps they live on another planet. Or there are some very persuasive salesmen in the large banks who routinely finance mine production and are calling in favours.
Another surprise is that the number of Swap (bullion bank trading desks) shorts has increased from 26 to 28, while the longs remain at 20. The shorts position is now $47bn, which is an average position of $1.68bn each, while the 20 longs are long $13bn, or an average of $650 million. Our next chart summarises the gross and net positions.
The jump in the liabilities of these short positions shows how difficult it is for the Swaps to close them down. With the price above $1900 tonight their losses are mounting, and there is nothing they can do about it.
China & Russia Making Moves In The Gold Market
In the physical gold market Chinese buying is returning, with 40.2 tonnes going to China from the Swiss refiners in April and a further 10.1 tonnes to Hong Kong. It is easy to forget how cheap gold got in yuan because of its strength against the dollar when gold was trading below $1800. In other news, Bloomberg reported that central banks are buying gold through the Bank of England, paying premiums of 50 cents. And Russia’s National Wealth Fund now has the official go-ahead to buy physical gold. In silver, the US mint has admitted to a shortage of silver and is postponing pre-order windows for the remaining Morgan and Peace silver dollars.
A tight physical market just got a bit tighter.
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