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 & Silver Prices in

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.

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
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
MOST READ
Silver Technicals - Silver technicals - Zealllc
List of the Largest Diamonds In the World - Famous diamonds  (16)
How To Buy Gold Or Silver - Trace Mayer - Run to Gold  (10)
On corruption - Food for thought  (12)
Most commented articles More... 
TOP RATED
The Gold Bug (Edgar Allan Poe) - Treasures and Gold Fever - Edgar Allan Poe  (13)
On corruption - Food for thought  (12)
How To Buy Gold Or Silver - Trace Mayer - Run to Gold  (10)
March 27, 1980 : Silver Thursday, or the end of the The Hunt Brothers Story - History of Silver - Playboy  (4)
Most commented articles More... 
MOST COMMENTED
Latest Comments
‘Real’ Performance Comparison
26 MarChristopherbalz
Question: In the method of figuring inflation referenced, what is the rationale for adding population growth to productivity growth? Sugge...
100 Items That Disappear First in a Disaster
23 Markevthorne
68, 69 probably not that safe - particularly if you're growing your own vegetables - keep a Maine Coon cat instead: does the job automatically.
Farage Interviews Le Pen: “Prison of the EU”
21 Marneville1
BRITANNIA RULES THE WAVES AND NOW BREXIT WAIVES THE RULES. GO FOR IT FRANCE AND RID YOURSELVES FROM THE CHAINS OF IDIOTS. NOT SIN...
How the Fed Operates — And Why It's a Problem
20 Marramasart
In a nutshell, the Fed facilitates the theft of the value of the dollar, as they can control the increase in supply which at the same time inverts ...
How the Fed Operates — And Why It's a Problem
20 Marneville1
With all due respects for outlining how the crooked american Fed works or should work. From all our research we find the following the Fed...
Sparta - Gold prohibition in a collapsing economy
18 Markevthorne
You've answered none of the authors points: your comment is flat rubbish.
America Too Broke to Fix Crumbling Infrastructure? “Bridges, Roads,...
16 MarCameron Waugh1
Just like the leaders of the Bolshevik revolution were not Russians, those formulating belligerent US foreign policy are not Americans, and they ha...
POTUS at SOTUS
16 MarDRGEORGE1
Try explaining that to my patients dying on public waiting lists or getting ripped off by exorbitant private specialist fees!
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS