Gold And Silver Are Potentially Explosive

Gold And Silver Are Potentially Explosive by Dave Kranzler – Investment Research Dynamics

Gold and silver are acting differently right now. Usually when the open interest in the paper gold (Comex) net short of the bullion banks becomes overweighted, it’s a signal that they are getting ready attack the price of gold by triggering massive stop-loss selling by the technically-driven hedge funds.

And through last Tuesday, per the latest COT report, the Comex banks had piled heavily into the short side, feeding paper shorted to the hedge funds. And true to form, the market was attacked aggressively this past week starting Tuesday with the expiration of Comex options. Interestingly, the banks had to wait until after the Comex floor trading closed on Tuesday in order to take advantage of a thinly-traded electronic “access” market that is open for about another 90 minutes after the Comex closes in order to push down the price of gold enough to trigger automated hedge fund algo stop-loss selling.

The attacks on the price of gold persisted through Thursday, resulting in what appears to be a record weekly percentage drop in Comex gold open interest. But this attack resulted in a shallow price decline.  And if you trace the build-up in the bullion bank short position over the past couple of weeks, it appears that the banks were willing to sustain losses on those shorted contracts in order to cover them.  Bill “Midas” Murphy at Lemetropole Cafe first pointed this pattern out to me and I confirmed his theory by tracing out the rise in the commercial short interest with the movement in the price of gold.

At the same time, there has been a massive amount of silver – as reported – moving in and out of the “registered” accounts at the Comex silver vaults.  The silver in the “registered” account is the silver designated to be available for delivery.   On the last two days of this past week, for instance, nearly 30% of the silver held in the registered account was moved into the “eligible” account. The “eligible” account is the account in which silver is allegedly “safekept” for the owner of that silver.

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Dave Kranzler

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics. Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.