The sell-off in precious metals gathered pace this week into what is often called capitulation. Money-managers (hedge funds) cut their long gold positions on Comex by 19,044 contracts in the week to Tuesday, 26 March. This was the biggest single factor in the fall in open interest, which continued for the rest of that week. Open interest is shown in the chart below.
Since Tuesday, despite the slide in the gold price, open interest has picked up indicating that there is buying support at these levels. Japanese money-printing at unprecedented rates should turn out to be a major bull factor; however signs that the US and eurozone economies are slipping back into recession has undermined energy and metal prices generally, giving a fig-leaf of justification for marking down precious metals.
To summarise, the bullion banks are still closing their short positions in gold, the extent of which will be revealed in the Bank Participation Report due this evening.
Silver is very different as the chart below illustrates.
Open interest has been climbing to close at nearly record levels despite the fall in the price, and the futures market has seen big volumes on falling prices. The attempt to smash the price has not dislodged the longs, despite unusually large hedge fund shorts at over 22,000 contracts. This is ultimately bullish behaviour, backed up by strong physical demand for silver eagles and ETFs.
The Week To Come
Predicting the time and price for the bottom of gold and silver prices is a mug’s game…
Read the complete article at GoldMoney here.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.