Gold trading volume and open interest has collapsed on Comex.
August 19 (King World News) – Alasdair Macleod: Gold and silver drifted lower this week, consolidating the rise from last month’s lows. In European trade this morning, gold was at $1753, down $50 from last Friday’s close. Silver was at $19.30, down $1.47 on the same timescale.
Rarely do we see such negative sentiment, revealed by Comex turnover, which for gold has sunk close to all-time lows. This is shown by our snapshot from the Comex website.
The thin blue line represents Open Interest, which is also at an extreme low, better illustrated in our next chart.
On Tuesday, Open Interest hit a low of 453,960 contracts. To put this in context, in 2020 there was bear closing in the greatest bear squeeze in gold ever seen, taking gold from $1450 to $2070. Open Interest never fell below 469,000 contracts as all the shorts ran for cover.
On 24 April 2021, Open Interest got down to 449,729 contracts, which led to gold’s second challenge at the $2070 level eleven months later.
We can see that in general terms an Open Interest decline to 450,000 contracts is about as low as it gets, and while it does not necessarily mark the low price for gold, it is a strong indicator for higher prices to follow. The reason is obvious: the bulls have generally sold out, and there are few sellers left.
This is confirmed by dwindling volumes. Generally, bullish interest is required to drive volumes, and that is missing. This appears to be part of what traders term a risk-on environment, when traders turn bullish on financial assets and bearish on hedges. Our next chart of the dollar’s trade weighted index and the S&P 500 summarises the wider bullish market sentiment over the last month.
Principally due to euro yen and sterling weakness, the dollar has rallied strongly, a situation likely to continue. It has encouraged portfolio money to buy US equities, reflected in the S&P. But the S&P appears to be losing bullish momentum, as the yield on the 10-year US Treasury has begun to rise again. This is next.
In the real, as opposed to the technical world, the battle is between the bulls dreaming of transient inflation and the return of a recession requiring bullish stimulation, and the bears pointing out that the inflation problem is not going away. We still face a winter of discontent, with higher energy and food prices, threatening Europe particularly. Any hope that Putin will back down over Ukraine before the winter sets in is the stuff of fairyland.
So, risk-on looks likely to be replaced by risk-off, when bond yields begin to soar, and equities collapse. In a world driven by Keynesian investors, we will then need to see a switch in sentiment from a belief that higher interest rates work against gold, favouring dollar cash and short-term Treasury bills instead. But that meme might be defeated by a severe bear squeeze on gold and energy, when such considerations don’t matter. And that’s what Open Interest and Comex volumes indicate.
ALSO JUST RELEASED: Russia And China Have Amassed 40,000 Tonnes Of Gold As Putin Dominates Geopolitically CLICK HERE.
ALSO JUST RELEASED: Biggest Gold Buyer In The World, Plus Fear As Catastrophic Power Crisis In Germany Unleashed CLICK HERE.
ALSO JUST RELEASED: Celente – Americans Now Worried About Feeding Themselves Amid Soaring Food Inflation CLICK HERE.
ALSO JUST RELEASED: Art Cashin Warns Of Huge Similarity In Stocks Today vs 60 Years Ago CLICK HERE.
ALSO JUST RELEASED: Gold Bull Catalyst, Inflation Chart Of The Day, Homebuyers Panic, Recession And Bear Market Rally CLICK HERE.
ALSO JUST RELEASED: 2 STUNNING CHARTS: Consumers Drowning In Debt As Electricity Prices Continue To Skyrocket! CLICK HERE.
ALSO JUST RELEASED: Very Bullish Sign For Gold & Silver, Plus More Signs Of Serious Economic Problems CLICK HERE.
ALSO JUST RELEASED: James Turk – Gold & Silver Pullback Not Surprising But Look At This Shocking Chart! CLICK HERE.
ALSO JUST RELEASED: Greyerz – This Global Collapse Will Be Like Nothing Seen Before Featuring Economic Disintegration, War & Riots CLICK HERE.
© 2022 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the articles is permitted and encouraged.