In my most recent commentary, “Recent Gold Price Declines = The Cusp of a Major Upward Move”, I explained how stop-loss and margin call selling can help catalyze a huge decline, in highly leveraged markets like gold, silver and other precious metals. Quick, massive and seemingly senseless price declines shell-shock market participants and facilitate the unloading of legacy short positions on the cheap.
Last week, I showed you how the CFTC’s “Commitments of Traders Report” corroborated the fact that the big bullion banks used the big sudden decline on July 3rd to massively reduce their long-standing legacy short positions. I predicted that the big decline on Friday, July 7th was going to be used to do more of the same. Now, we have the proof that this is exactly what happened.
I don’t have space to cover the entire process by which price falls are catalyzed. I also don't have room to prove, yet again, what I have proven before; that there is an enormous gap between the supply and demand for gold filled, since April 2013, by a not-so-mysterious "gold supplier of last resort". For a fuller understanding, I suggest that you read last week’s commentary and the novel, “The Synod” (eBook) (paperback).
Suffice it to say that the flash crashes in silver, and the big declines in all precious metals prices, on July 7th, like the one on July 3rd, and the previous one in late June, were all used to close the book on enormous numbers of legacy short positions. This time, the bullion banks concentrated on reducing silver and platinum short positions. However, they also massively reduced gold shorts again, just as they did before.
The latest Commitment of Traders Report’s statistics were tabulated as of the close of trading July 11, 2017. As of that moment, the bullion banks had closed 2,823 platinum short contracts (141,150 troy ounces of platinum); 9,560 silver short contracts (47,800,000 troy ounces of silver) and 19,392 gold short contracts (1,939,200 troy ounces of gold.
The amount of platinum shorts they closed may seem very small, compared to what they did in silver and gold, but remember that it is a much smaller market. Platinum mines produce only 1/18th the tonnage as gold mines, and only 1/180th the tonnage of silver mines every year. The reduction numbers, with respect to all the precious metals, each represent a massive percentage of the total short position held by the banks. What makes it even more noteworthy is the fact that this comes on top of the massive percentage they closed last week!
The bottom line? The most knowledgeable people in the world must believe that precious metals prices are going to be rising fast and hard in the next few months. Otherwise, they wouldn’t be fleeing from short positions they’ve rolled over for years! Just take a look at the report…
Frankly speaking, no one in the world has a better handle on what is really going on in the precious metals markets than these bullion bankers. Don’t expect, however, that they are going to tell you the truth. Their analysts won’t be writing about how stocks of physical metal are growing perilously low, nor will there be any discussion of the massive excess of demand over limited supply. It simply isn’t in their interest to do so. They want profits, not losses. If they told you, instead of helping get rid of the short positions they are running away from, you would be helping to bid up the price. They are not ready for that. They need to jettison more short positioning first.
Look at what they do, not what they say. They are fleeing from long-standing downside bets they’ve rolled over, year after year, for many years. Some clueless hedge funds (the so-called “managed money”) are taking them over. They will pay an enormous price for doing that. Come mid to late August, for example, some of them are going to be forced to deliver real gold they don’t have. By October, some will be scrambling to source gold bars for delivery. Others will get out sooner than that, but they will pay a very heavy paper money price to do it.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.