EDITOR NOTE: Every now and then we bring up the CFTC’s Commitment of Traders report, a monthly document that tells you what’s going on with futures contract positions among speculators, institutional funds, and commercial buyers and sellers. The article is quite technical, but it goes over a theme that we’ve been covering over the last few months--namely, that bullion banks (who have gold on deposit) are net short gold futures. There is a massive surge in buying, and this surge will potentially demand “physical delivery.” These buyers aren’t hedge funds, who speculate and close out positions, but billionaire investors who aim to get their hands on the metal to hedge inflation. Do bullion banks even have that much physical gold in their vaults--considering there may be more paper gold than actual (available) gold? Either way, the yellow metal is set for an explosive move upward, and this dip appears to be the perfect time to buy more of it.
Today London analyst Alasdair Macleod told King World News that big money is aggressively buying the takedown in the gold market, and this is creating a major problem for the bullion banks.
September 26 (King World News) – Alasdair Macleod: Yesterday’s release of Commitment of Traders’ figures for last Tuesday appear to reflect a repeat of the position in late-March, following which the gold price on Comex gapped up to massive premiums over spot. At that time, the coronavirus was blamed. Despite some countries facing a second wave, let’s see if with mines and refiners operating normally it happens yet again.
This week, the non-speculators have clawed back 18,778 of their net short position, with the bullion banks (Swaps category) achieving 9,874 of it. With Producers/Merchants equally cutting net hedging, this is not as good a result as the bullion banks would have hoped for.
In the specs, Managed Money (hedge funds) has crashed its net long position by 29,650, reducing its proportion of net longs in the speculators’ category by 4% to 38%. It is hardly a surprise on two counts: they have been increasing their net longs in recent weeks and have responded to the “sell gold buy dollars” mantra on the dollar’s trade-weighted rally. But it is worth noting that at net long 81,448 contracts their aggregate position is considerably less than their long-term average of 111,000 contracts. This should concern the bullion banks, because this category is the cannon fodder for their profitable ramp-and-crash strategy, and there are not enough Managed Money net longs to close down their net shorts.
Big Money Aggressively Buying Gold Dip…Again
That brings us to the other major speculator category — the Other Reported which has increased its net long exposure by 7,733 contracts, buying into a falling market. At 164,345 contracts this category’s long contracts are at a record. Interestingly, on 24 March it also hit a record, when gold had been smashed down to $1457 the previous day. In other words, this category had the intelligence to buy gold futures in huge quantities on the February/March knockdown and are doing it again.
By a process of elimination this was the category that stood for delivery – from memory it was about 150 tonnes, pretty much an unprecedented amount. Will they stand for delivery this time? Interestingly, the non-active October contract, which runs off the board this week, has 37,810 contracts outstanding, the equivalent of 117.6 tonnes.
Setup Explosive As Bullion Banks Fail To Close Out Shorts
To summarise, the signs strongly point to a failure yet again of the bullion banks to close their shorts. The other side of the trade is no longer flighty hedge funds who rarely stand for delivery, but the Non-Reportables, who don’t fit into the other categories and are presumably family offices and billionaires around the globe, sensitive to the consequences of monetary inflation.
In price terms, this setup is potentially explosive.
***To listen to the incredibly powerful audio interview with Danielle DiMartino Booth that is a must listen for anyone who wants to understand the big picture as she covers everything from the need for investors to aggressively buy the current dip in gold prices to the stock market hitting the biggest bubble level in history and much more. To listen to this incredibly powerful interview click here or on the image below.
Originally posted on KWN