As we kickoff another trading week, the war in the paper gold market continues.
November 1 (King World News) – Alasdair Macleod: The Commitment of Traders’ Report showed a marked increase in Managed Money longs, indicating that hedge funds on the margin were selling the dollar and buying gold futures. This was reflected in a jump in open interest of 24,605 contracts from the previous Tuesday, which by Wednesday had risen to 517,324 — an increase of 31,350 from 19 October.
The reason for mentioning the increase in open interest is that any increase in open interest is at the expense of the combined short positions of Swaps and the Producers/Merchants categories. Unless the miners and refiners increase their shorts, it is down to the Swaps, of which 73% (on the last Bank Participation Report) are bullion bank trading desks. Bullion banks are desperate to reduce their net exposure to as little as possible ahead of the year- end, when London-regulated LBMA members will begin complying with the net stable funding ratio requirements of Basel 3.
The monetary value of the Swap’s gross and net shorts are the subject of our next chart.
The effect of the jump in open interest is reflected in Swap’s liabilities, which on 26 October stood at $46.9bn gross, and $33.8bn net of longs. 30 dealers are short and 19 are long. The average short position is therefore $1.4bn, which the bullion banks cannot reduce and appears to be running away from them again.
The technical position, which matters to chartist followers, is next.
The War In The Paper Gold Market Continues
This shows that if the gold price breaks above $1810 and holds it, a golden cross will form between these two commonly followed moving averages below a rising price. This is acknowledged by chartists to be one of the most important bullish confirmations in accordance with Dow Theory. No wonder the price was hit hard on Friday; the Swaps could not afford to let the price run any higher, triggering a further increase in their short positions…
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Furthermore, Friday was the month-end, when bank treasurers will have noted the progress, or lack of it, in reigning in short positions.
At least we have a new month ahead. But the struggle for the establishment bullion banks to comply with Basel 3 by the year-end continues…To listen to Alasdair Macleod discuss gold, silver, Bitcoin, and more CLICK HERE OR ON THE IMAGE BELOW.
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