Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Price Underlying Strength

Commodities / Gold and Silver 2014 Jul 04, 2014 - 12:05 PM GMT

By: Alasdair_Macleod

Commodities Gold and silver spent most of the week consolidating recent gains by moving broadly sideways, but their underlying strength was a notable feature. The first chart is of gold and its open interest on Comex.

The increase in open interest tells us that the rise in price was on the back of buying rather than a bear squeeze, which would have seen rising prices on steady-to-declining OI. This is an important development, because it indicates that speculators are beginning to think the downtrend of the last 30 months might be over. Without buying into a new rising trend, any rally would be limited to a bear squeeze.

It appears the bullion banks have increased their short positions, but there is possibly a good reason for this. If they had squeezed the bears and allowed the gold price to run up to, say, $1400, they would have shown larger losses on their short positions at the half-year. In other words, bullion banks dressing up their own profit and loss account took temporary precedent over trading strategy.

The silver chart looks different at first glance, with open interest declining sharply before picking up in the last few trading days. This is shown in the second chart.

The reason for the fall in OI in the second half of June was simply the expiry of the July contract when over 100,000 contracts had to be either closed or rolled into the next active month (September). That process is now complete, with some bulls understandably booking short-term profits. This being the case, we can now expect OI to climb again towards the 160,000+ region.

Base metals have had a new lease of life, partly reflecting dollar weakness and partly a bear squeeze in the wake of wild stories about multiple hypothecations of warehouse metal in Chinese ports. Platinum was a stand-out beneficiary, and gold and silver obviously benefited as well.

Perhaps the most interesting news this week was the House of Commons Treasury Committee called before it senior officials from the Financial Conduct Authority and the CEO of the London International Financial Futures Market to give evidence on the London gold market and the gold fix. The televised version can be found here <> .

It rapidly becomes apparent that the answers to the Committee’s questions were inadequate. The second session, with Rhona O’Connell of Thompson Reuters and Alberto Thomas a lawyer from Fideres LLP appeared to confirm the Committee’s worst fears about the London bullion market and the gold fix. As the Chairman, Andrew Tyrie summarised, “You’ve told us a pretty depressing story: the market has the potential to be rigged, that’s it’s not remotely competitive enough, that 10-30% of the days traded it’s likely to have been rigged, that up to 40 basis points are likely to have been extracted from customers, and that regulators could and should have acted earlier, particularly after LIBOR. So is there any reason we should not be treating this as an appalling story?”

It is clear that the London gold market faces a radical overhaul, involving closer regulation and greater transparency. In this environment, bullion banks are likely to hold back on aggressive trading activity until the regulatory position clarifies.

Next week
Monday. Japan: Leading Indicator, Bank Lending Data, Current Account. Eurozone: Sentix Indicator
Tuesday. UK: Industrial Production, Manufacturing Production. US: Consumer Credit. Japan: Economy Watchers Survey.
Wednesday. Japan: M2 Money Supply, Key Machinery Orders.
Thursday. Japan: Consumer Confidence. UK: Trade Balance, BoE Interest Rate Decision. US: Initial Claims, Wholesale Inventories.
Friday. US: Budget Deficit

Alasdair Macleod

Head of research, GoldMoney

Alasdair Macleod runs, 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 - 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