On the heels of the recent weakness in the price of gold, there is no question that something big is happening in the gold market.
Michael Oliver’s audio interview has now been released!
Big Short Covering
January 15 (King World News) – Alasdair Macleod out of London: Last Friday, when the gold price fell $85 before recovering slightly to close at $1848, saw a substantial change in the Swap’s short position (bullion bank trading desks), which together with a fall in the Producers net shorts closed down Managed Money positions (hedge funds) to the tune of 38,335 contracts. This is the largest change in positions seen in a long time.
It is noticeable that the Other Reported and Non Reported categories took the opportunity to add to their longs on the shake-out. And in recent weeks it is these categories which have stood for delivery for 921 contracts (92,100 oz — nearly 3 tonnes) since 1 January.
So why have the hedge funds turned tail? The obvious answer is rising US Treasury yields, our next chart.
Clearly, bond yields are headed higher. As monetary inflation takes off and it dawns on the market that monetary inflation is already out of control, it is hardly surprising. Indeed, it is a sign of weaker dollar exchange rates and a continuing fall in the dollar’s purchasing power. This is very simple to understand and was why in the 1970s the Fed funds rate rose from 6.6% to over 19%, while gold rose from $36 to $850. A rise in interest rates and a rise in the gold price actually go together.
Investment managers don’t understand this. They think rising interest rates kill the gold price, and that is why they have cut their longs so dramatically.
In the short-term, we must ride this out. Do not be spooked if the gold price drops further, perhaps even testing the recent $1760 low. For the reality is the inflation game has only just started, and the dollar will be destroyed by it. This is why to regard gold as an investment (as do the hedge funds) is a bad mistake. It is sound money. Its time preference will remain steady while the dollar’s increases dramatically. And that is scary for anyone holding dollars.
JUST RELEASED: To listen to Michael Oliver discuss the gold and silver takedown and and his remarkable advice about what investors should expect next and more CLICK HERE OR ON THE IMAGE BELOW.
Also Just Released: Michael Oliver – Gold Is Going To Trade Above $8,000 Within 24 Months CLICK HERE.
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