As we move through the last few trading days in 2020, commercial hedgers are now net-short $38 billion of paper gold.
December 18 (King World News) – London analyst, Alasdair Macleod: As foreshadowed in our recent reports, hedge funds in the Managed Money category have begun to buy gold futures and sell dollars. They are still less than average net long of gold contracts, so have the capacity to squeeze the bullion bank traders in the Swaps category.
The Swaps did not start from a good position, having unsuccessfully struggled to close down their shorts from as long ago as August 2019, as our next chart shows.
Today, this leaves them net short $38 billion, gross $51 billion.
An interesting feature of the COT figures is the Non-Reported category, which has suddenly gone net long of 3,255 contracts. It is a reasonably bet that this category, which is of predominantly smaller traders, have learned that they can obtain scarce bullion on Comex by standing for delivery.
This was also the week that bitcoin exploded into new high ground. This is important, because crypto traders have learned that the Fed is inflating the money supply and debasing the dollar, something that cannot happen with bitcoin, beyond an approaching limit. In other words, they understand what is happening to fiat money. And while mainstream investors do not understand the practicalities of sound money (i.e. gold), at least they are learning the lessons of unsound money.
No doubt, they will drive bitcoin higher still, or more correctly the purchasing power of the dollar down, measured in bitcoin. It is an early warning of a substantial fall in the dollar, and on cue, the dollar’s trade weighted slid lower this week, which is our last chart.
In the New Year we can expect foreign exchange selling of the dollar to continue, because foreigners are massively overweight in dollars and dollar cash, and now facing losses. The squeeze on bullion banks has a way to go, and with monetary inflation going hyper, we have likely seen the lowest gold prices recently, ever.
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