Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold $1200 Underpinned by Physical Demand

Commodities / Gold and Silver 2014 Sep 26, 2014 - 03:30 PM GMT

By: Alasdair_Macleod

Commodities

This week saw gold rally $15 to $1233 on Tuesday before sliding to $1207 yesterday morning, then rallying in the afternoon. Silver's moves tracked gold's, bottoming out at $17.30 yesterday at the London opening. This morning precious metals are firmer in pre-LBMA trade, reflecting some short-covering ahead of the weekend.

The action, as has often been the case recently, is in paper markets with hedge funds shorting gold and silver against a strong dollar. This can be readily seen in the following chart of Managed Money shorts on Comex, which is back in record oversold territory. The chart of silver is similar.


MM Gold Shorts Chart

The analysts encouraging fund managers to sell gold are mostly working for the investment and bullion banks, and it turns out that their traders are buying it, closing their bear positions. This is shown in the next chart of Swaps, which represents mostly the aggregate futures positions of the non-American bullion banks.

Gold Swaps versus Gold Price Chart

So the swaps have reduced their net shorts by over 60,000 contracts (190 tonnes) over the last five weeks. The next chart is of the largest four traders, which are mainly the American bullion banks.

Gold - Largest 4 Net Position Chart

Here again, over the last five weeks they have bought back about 200 tonnes, which added to the swaps makes nearly 400 tonnes, bought over the last month-and-a-bit by banks whose analysts are mostly encouraging the public to sell. As they say, go figure.

This does not mean that gold and silver won't go lower next week: we will only know that with hindsight. But it is going to get more difficult for the bullion banks to close their shorts from here for the following reasons: the weak hands have now mostly sold, and there is increasing evidence (mostly anecdotal admittedly) of growing physical demand for delivery. This varies from wealthy investors taking a long-term view, to the pre-Diwali season stock-building reflected in centres such as Dubai, as well as the usual suspects such as the Chinese and Russians. In fact this morning the Shanghai Gold Exchange reported deliveries rose to over 50 tonnes in the week to 19th September. This is the highest weekly delivery since February, and at current prices SGE demand could turn out to be even higher this week.

A brief mention on silver: between Thursday 18th and yesterday, the equivalent of 48,265,000 ounces were swapped for 9,630 Comex December contracts (Exchange for Physical, or EFP). On Tuesday the volume of futures and options was exceptionally high, Open Interest fell 5,501 contracts, and 2,489 contracts were exchanged for physical. Could it be that this silver was required to be delivered to other markets, such as Shanghai, where stocks are depleted and silver is trading at a price premium?

Could it be that the acceleration of demand for silver eagles is indicative of the demand for physical silver at these low prices? If so, it is an indication that Comex is pricing silver futures too low to reflect genuine demand, and the price will struggle to go lower.

Next week

Monday. UK: BoE Mortgage Approvals, Net Consumer Credit, Secured Lending, M4 Money Supply. Eurozone: Business Climate Index, Economic Sentiment, Industrial Sentiment, Consumer Sentiment. US: Core PCE Price Index, personal Income, Personal Spending. Japan: Real Household Spending, Unemployment, Industrial Production, Retail Sales.

Tuesday. Japan: Housing Starts, Construction Orders, Tankan Survey. UK: Nationwide House Prices, Current Account, GDP (3rd est.), Index of Services. Eurozone: Flash HICP, Unemployment. US: Case-Shiller Home Price, Chicago PMI.

Wednesday. Japan: Vehicle Sales. Eurozone: Manufacturing PMI. US: Manufacturing PMI, ADP Employment Survey, Construction Spending, ISM Manufacturing, Vehicle Sales.

Thursday. Eurozone: PPI, ECB Deposit Rate, Refinancing Rate. US: Initial Claims, Factory orders.

Friday. Eurozone: Services PMI, Composite PMI, Retail Trade. US: Non-Farm Payrolls, Private Payrolls, Trade Balance, Unemployment.

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

© 2005-2019 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

6 Critical Money Making Rules