Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Sharp Consolidation

Commodities / Gold and Silver 2014 Jul 18, 2014 - 03:28 PM GMT

By: Alasdair_Macleod

Commodities

Before yesterday's (Thursday) rise in bullion prices, precious metals were in corrective mode this week after recent rises. There were two big stand-out sales of gold contracts on Monday, estimated to be about 5,000 contracts at the European opening, and 15,000 on the US opening. The combination of the two sales drove gold down over $30, and on Tuesday a further sale of 15,000 contracts drove the price down to a low of $1293 for a total fall of $45.


This negative action occurred at the same time as a new banking crisis was developing in Portugal, with Banco Espirito Santo getting into financial difficulties. For many gold traders, this suggested these large sales were price intervention to maintain confidence in the financial system. For this to be true, Open Interest would have expanded on Comex reflecting new opening bear positions. As the chart below clearly shows this cannot have been the case.

Gold and Gold Open Interest Chart

With Open Interest contracting, the only conclusion has to be these large sales were speculators taking profits. This is an extremely important signal, because the sales are evidence that big speculative money is now accumulating gold positions on price dips instead of shorting gold on price rises. While there can be little doubt that the sales were done in such a way that they drove the price lower, what we did not see was the gentle accumulation of long contracts that preceded them. And why would these speculators drive the price lower? To accumulate long positions again.

It does not appear to have been a bullion bank, because bullion banks have been going short in recent weeks: we know this from the Commitment of Traders reports. More likely it was a managed fund, which I expect will be confirmed on the Commitment of Traders numbers tonight in UK time. I shall tweet the evidence on @goldmoneynews when available. This being the case, we can expect growing numbers of speculators and hedge funds to accept that the trend has finally turned bullish, so we can climb the "wall of worry" that is the early stages of a decent bull market.

The developing bull-run looks like turning into a squeeze on the bullion banks themselves. The non-US banks, according to the last Bank Participation Report, were net short 62,099 contracts, which compares with a record of 78,564 in October 2012. They got away with their short exposure then, but conditions are very different today and they may be forced to cover.

This morning initial price movements for gold and silver are weaker at the European opening, while most other markets have steadied. If my analysis is right, then we can expect prices to steady during the day, with buyers looking to buy into the dip.

One key metric to watch will be the USD/JPY rate, with a dip below ¥101 putting adverse pressure on carry trades.

Next week

Monday. No material announcements scheduled.

Tuesday. Japan: All-Industry Activity Index, Leading Indicator. UK: Public Borrowing. US: CPI, Retail Sales, Existing Home Sales.

Wednesday. UK: BBA Mortgage Approvals, CBI Distributive Trades. Eurozone: Flash Consumer Sentiment. Japan: Customs Cleared Trade.

Thursday. Eurozone: Flash Composite PMI. UK: Retail Sales. US: Initial Claims, Flash Manufacturing PMI, New Home Sales. Japan: CPI.

Friday. Eurozone: M3 Money Supply. UK: GDP (3rd est.)

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2014 Copyright Alasdair Macleod - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in