Despite today’s pullback in the gold market, it appears there is a big problem for the shorts.
Paper Gold Short Attacks No Longer Working
October 26 (King World News) – Alasdair Macleod: The Commitment of Traders report showed a marked deterioration in the Swaps position. They now account for 80% of the shorts, when the bullion bank traders among them will have hoped to reduce their exposure. Swaps are now net short $29.8bn, of which roughly 73% is bullion banks according to the last Bank Participation Report.
On the Specs side, Managed Money (hedge funds) are still not playing, with roughly half their average net long position at 57,799 contracts. When they wake up to non-transient inflation, I expect to see them over 175,000 net long…
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The Other Reported category now dominates the Speculators at 51% of the total. For bullion banks, this is the unpredictable wild card. They understand how to deal with hedge funds but cannot get a handle on this diverse category. Remember, this was the category that went record long in March 2020 leading to the EFP blow-up, when Comex soared to premiums of up to $90 over spot. While that might not happen this time, it must be making bullion banks very nervous.
Big Problem For The Shorts
Open Interest only increased by 1,592 contracts. The problem for the Swaps is that demand for physical is cleaning the market out on the dips. China’s deliveries into the public is greater this year than for all last year, and India’s imports have totalled 770 tonnes so far this year, substantially up on last year.
Bear in mind that Comex is about one eighth of the total gold derivative market, excluding options. The short positions in London will be far larger. They need to be resolved in the eleven weeks remaining this year, before Basel 3 applies. My guess is that from now on holders of gold deposit accounts must expect letters from their banks closing their accounts.
On the inflation side, we see escalating price pressures from higher energy prices still working through into production costs, backwardations in base metals, no end to the logistics disruption, and therefore the prospect of significantly higher consumer prices in the coming months.
This is a very difficult situation for the shorts who continue to launch downside attacks in the paper gold market, but the problem is they keep running into aggressive physical buying on these dips…to listen to Alasdair Macleod discuss the emergency meeting in London regarding the metals markets CLICK HERE OR ON THE IMAGE BELOW.
***To listen to legend Pierre Lassonde discuss the gold, silver and mining share markets and more CLICK HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: James Turk: Gold Breaking Above This Key Level Will Ignite Move To New All-Time Highs CLICK HERE.
***ALSO JUST RELEASED: CHART OF THE DAY: Gold Starting To Shine Again CLICK HERE.
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