Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench

Gold market report: bullion banks going net-long

IMG Auteur
Published : May 25th, 2013
542 words - Reading time : 1 - 2 minutes
( 6 votes, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

24hGold - Gold market report: ...It has been an interesting week for gold. On Tuesday, open interest on Comex fell sharply by 6,961 contracts. The action was in the June contract which fell 12,072, only 3,000 of which appear to have been rolled into the next active month (August). The bulk of the fall in the June number must have been from bears closing their shorts ahead of Ben Bernanke’s testimony to Congress on Wednesday, but we can see from the numbers that the big bullion banks did not supply the stock (see below).

In the wake of his testimony and the release of the FOMC minutes there was huge volatility in all markets, including a 7% crash in Japanese equities. The trading range for gold was over $60, as first the bears took fright over Bernanke’s reaffirmation of money-printing policies, with gold rising nearly $30 in 10 minutes in a classic bear squeeze with the bullion banks refusing to supply stock. The market was then driven sharply lower, probably assisted by official intervention lest people get the idea that gold is better than dollars.

The net position of the four largest traders, which we can assume are all bullion banks, on 14 May was long for the first time for as long as records are available, shown in the chart below.

24hGold - Gold market report: ...

Keep in mind the fundamental difference between precious metals and other financial markets: the former are seriously oversold and the latter seriously overbought. Logic strongly suggests that retreats from these extremes would drive gold and silver up, and equity and bond markets down. Therefore, the action in gold and silver was perverse. The evidence is in the chart below, showing how extreme the hedge fund (managed money) short positions in gold have already become.

24hGold - Gold market report: ...

Factor in the severe shortage of physical bullion and the conditions for an explosive move to the upside become apparent. This is why the market-making bullion banks would be stupid to close their hard-won net long position, and they know it.

The vested interest for lower gold prices lies squarely with the four major central banks, which are most probably going to accelerate quantitative easing. Japan is already doing so; the Fed is backing off earlier suggestions they will slow down; the ECB has a developing euro-area slump; and Mark Carney, Governor-designate for the Bank of England, was this week quoted as applauding Japan’s “bold policy experiment”.

Suppressing gold prices is central to retaining monetary credibility in these extraordinary times. However, there are important geopolitical implications, which I write about in a GoldMoney article for release this Sunday.

Next week

A quiet start announcement-wise, warming up on Thursday and Friday.

Monday: Nothing important.
Tuesday: UK’s Nationwide House Prices. US Case-Shiller Home Prices, Consumer Confidence. Japan (overnight) Retail Sales.
Wednesday: eurozone M3 money supply. UK CBI Distributive Trades.
Thursday: eurozone Business Climate Index, Consumer Sentiment, Economic Sentiment and Industrial Sentiment. US Preliminary GDP and GDP Deflator, Initial Claims, Pending Home Sales. Japan (overnight) Core CPI, Real Household Spending, Unemployment and Industrial Production.
Friday: Japan Construction Orders and Housing Starts. UK BoE Mortgage Approvals, Net Consumer Credit, Secured lending, BSA Mortgage Statistics, and BoE M4 Money Supply. Eurozone HCIP and Unemployment. US Core PCE Price Index, Personal Income, Personal Spending and Chicago PMI.

Companies Mentionned : Bullion | I-min. | Metals X |
Data and Statistics for these countries : Japan | All
Gold and Silver Prices for these countries : Japan | All
<< Previous article
Rate : Average note :5 (6 votes)
>> Next article
FinanceAndEconomics.org is the website of Alasdair Macleod, who has a background as a stockbroker, banker and economist. Alasdair is available for seminars, speeches and interviews. Please check on Services to get further detalils.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
First Report since April, 2014
05 FebAndy_K1
Jason, One of your articles written way back is one of the reasons I started paying attention to silver and shortly thereafter started to ...
Something has Changed in Gold St...
06 Febneville
No nothing strange has happened in GOLD stocks....absolutely nothing.....The fact of the matter is that you byrne have been playing the man and...
The Revisionist Theory and Histo...
05 Febovertheedge
"The key is in the hand of the U.S. government. It is the same key that was used to lockthe U.S. Mint to silver in 1873, and to gold sixty years la...
First Report since April, 2014
05 FebS W.1
Here I was just 2 days ago thinking whatever happened to that evangelical silver guy. Low and behold up he springs, like some spirit from the g...
LBMA Silver “Price”: A Perfect S...
03 FebS W.
There is no doubt that the Comex can be used as a casino for those who want to trade Silver up/or down or maybe some just wish to take a small punt...
LBMA Silver “Price”: A Perfect S...
30 JanOzSILV1
Bron refuses to EVER admit this market is a Casino and the disconnect between Paper and Physical is a big clue to this
LBMA Silver “Price”: A Perfect S...
30 JanS W.
Usually I enjoy Bron's take on things,but to be perfectly honest, I can't understand 95% of what he his on about here. I get the feeling that h...
ANOTHER NAIL IN THE U.S. EMPIRE ...
30 JanDemosthenes0
Very naive and pretentious article! The author thinks he knows everything and yet knows next to nothing. Shale gas producers are neither stupid n...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Lara Expl.(Cu-Zn-Au)LRA.V
Revised Resource Estimate Report Filed for Maravaia Copper Gold Deposit
CA$ 0.32+0.00%Trend Power :
Corporate news
Black HillsBKH
Black Hills reports 4Q loss
US$ 53.10+4.32%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
Gasoline Inventories Rose Last Week despite Fall in Production
US$ 21.63-4.55%Trend Power :
Corporate news
United States Steel(Fe-Sn)X
U.S. Steel (X) States Ratification of Labor Agreements
US$ 7.08-3.54%Trend Power :
Corporate news
Black HillsBKH
4:34 pm Black Hills Corp beats by $0.04, misses on revs; guides FY16 EPS below consensus
US$ 53.10+4.32%Trend Power :
Corporate news
Black HillsBKH
Black Hills Corp. Reports 2015 Fourth Quarter and Full Year Results
US$ 53.10+4.32%Trend Power :
Corporate news
Transcanada PipelinesTRP.TO
TransCanada to Sign Substantial Agreement to Benefit Québec Economy
CA$ 48.65+0.16%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
4Q15 Crude Oil Prices: Fallout for the Energy Sector and SPY
US$ 21.63-4.55%Trend Power :
Corporate news
Comments closed