With the price of gold rising more than $20, today James Turk told King World News that we may now be in the early stages of a massive short squeeze in the gold market.
Eric King: “James, you had been warning that the gold and silver shorts were in trouble and may finally get squeezed to the upside. In the last few months, you had also warned that one of these options expirations we would see gold soar because of the delta hedging. Why is this option expiration at the end of May so important?
The Early Stages Of A Major Short Squeeze?
James Turk: “It’s a consequence of delta hedging. When the price starts rising, options writers have to buy gold in order to remain delta neutral. Given the size of the short position that is out there, the gold price will be like a rocket launching and picking up speed as it gains altitude. If this is in fact the tipping point, who knows what will happen to the price of gold? We’re a long way from knowing if this will unfold. Having said that, this is exactly the kind of action you would expect to see in the early stages of a short squeeze…
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If Short Squeeze Unfolds, Expect Skyrocketing Gold Prices
Both gold and silver have broken above their short-term moving averages and that signals a trend reversal. So now what we need to do is wait to see how this unfolds. There are still a couple of weeks to go before option expiry and that’s where I really expect the excitement to begin. Let’s put it this way, Eric, KWN readers around the world will know that a short squeeze is underway when they see a series of back-to-back daily gains much larger than what we are seeing today.”
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