Bullion banks covered some gold short positions, but how many longs are left to shake out?
June 21 (King World News) – Alasdair Macleod: Released tonight, the latest Commitment of Traders figures show a significant reduction in the Swaps (mostly bullion bank trading desks) shorts, nearly matched by the Managed Money (hedge funds) reducing their longs.
This is not a surprise, and it leaves the bullion banks with an improved position, particularly when the fall in price is taken into account.
At today’s price of gold, the gross short position is down to $41.4bn, and the net is at $29.8bn. And since then, Open Interest has also contracted by another 14,000 contracts. Still high, but not so painful.
Clearly, the Swaps are managing to shake out the bulls, but with Friday’s open interest at 466,106 contracts, further contraction appears limited. This is our last chart.
HOW MANY LONGS ARE LEFT TO SHAKE OUT?
Gold Open Interest Has Collapsed Near Recent Lows
But the other prize for the Swaps has been getting call contracts to expire worthless and having taken gold down from over $1900 at the beginning of the month, this has been very profitable.
All this changes next month, and the swaps will rely on growing fears of deflation, the narrative increasingly pushed as a result of the FOMC statement last week. We will need to watch the dollar’s trade weighted index, the bond market and importantly the S&P 500 index. If the S&P crashes, the Swaps will take gold down with it before it is right to buy. Remember that on the Lehman failure gold was marked down from $950 to $700, before it ran up to $1920 over the next three years…
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To listen to Dr. Leeb discuss the gold and silver takedown, why the pullback is most likely already close to being finished and why both metals are headed into the stratosphere CLICK HERE OR ON THE IMAGE BELOW.
To listen to Alasdair Macleod discuss this week’s takedown in the gold and silver markets and what to expect next CLICK HERE OR ON THE IMAGE BELOW.
Also just released: Gold Bull Alert, Plus 3 Stunning Charts CLICK HERE.
Also just released: Greyerz – Gold And The Coming Global Economic Meltdown CLICK HERE.
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