Thursday’s Raid On The Gold Market
by Dave Kranzler, Investment Research Dynamics As everyone knows by now, gold and silver took significant hits to their price last Thursday. While most analysis and commentary have attached this hit on the metals to the Fed’s FOMC meeting on Wednesday, the data shows that it is yet just another open interest raid directed at the high number of open February gold contracts one day ahead of the “first notice day” for Comex Feb gold. “First notice” is the first day of the contract month’s delivery period in which any investor holding a contract can get “noticed” for delivery of the gold represented by the contract (100 ozs.). In order to hold for delivery, the contract holder must have an accounted that is fully funded for delivery. Whenever the open interest is unusually high going into first notice, the Comex bullion banks always orchestrate a contract open interest price raid. Last Thursday this is what occurred. I did a podcast with Eric Dubin (The News Doctors) and “Doc” (Silver Doctors) late last week in which we discussed this bullion bank drive-by hit on gold and some other timely topics. You can listen to that podcast here: Comex Gold/Silver Price Hit. Briefly, the issue for the bullion banks who operate Comex vaults was that, as of Wednesday’s close, the amount of Feb gold contracts amounted to over 2.8 million ounces of gold. The problem is that the Comex vault report showed just under 800k ozs of gold available for delivery. If just half of the open gold positions held for delivery, it would cause a serious run on Comex gold and a serious price explosion higher. So the bullion banks triggered what I call an open interest raid on the Comex. This is an event which has occurred with monthly regularity for the 13+ years I’ve been trading the precious metals sector.