As we head into August, the gold market is set to erupt.

July 31 (King World News) – Alasdair Macleod:  Tonight’s Commitment of Traders release is interesting, because the Producers/Merchants category have cut their net shorts by 7,544 contracts, while the Swaps have increased their net shorts by 7,810.

Bullion Banks Now 77% Of All Paper Gold
Shorts As Producers Reduce

This is important, because it should be the Swaps reducing their shorts, with the bullion bank traders among them seeking to comply with Basel 3, if not now, certainly in a few months’ time in order to be compliant by the year end. The 77—23 split has moved decisively from 75—25. 

In the speculator categories Managed Money (hedge funds) has reduced both longs and shorts at nearly the same rate while open interest increased by 7,924 contracts. With the increase in net longs for Other Reporteds cancelling out a decrease for the Non Reportables, net changes are as small as it gets. 

So the standout message is that the Swaps are being squeezed. The next chart shows their financial position. 

With net shorts increasing persistently to $31bn when a normal jobbing position is below $20bn there is trouble brewing here. On Comex, we see physical deliveries increasing, and exchange-for-physicals have been running at elevated levels over the last two months — totalling 130,341 contracts to be exact. These are signs of stress for the shorts. What we don’t see is the forwards possessed by non-LBMA members in London, the clients of bullion 

banks in that market. While we know that physical liquidity is tight, paper liquidity is almost certainly so as well. Otherwise, we are asked to believe that non-LBMA members are net short to LBMA bullion banks. That is just inconceivable. 

A few years back I climbed La Soufrière in St Vincent and looked into the crater. It erupted a few months ago. I get the same feeling looking at the gold market today.

***To listen to Alasdair Macleod discuss where the gold and silver markets are headed and what the bullion banks are up to CLICK HERE OR ON THE IMAGE BELOW.

***To listen to the top trends forecaster discuss what surprises to expect in the back of 2021 CLICK HERE OR ON THE IMAGE BELOW.

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