A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be. - Wayne GretzkyThe reason this sell off in gold and silver doesn’t particularly concern me is we have seen this pattern now for more than a decade. Hedge funds buy paper gold and silver, pushing the prices higher on momentum and the bullion banks or commercials are on the sell side, building up a sizable short position.
That quote is from Dan Norcini's interview on King World News Blog LINK. Dan has been trading the futures market for twice as long as I have and, while I may not always agree with his analysis, I have to pay attention to what he's willing to share with the public and he knows the mechanics of the commodities markets as well as anyone out there. I may not always be right when I think he's wrong, but I know that his latest commentary is 100% correct.
I have traded and observed every single manipulated Comex paper gold/silver open interest liquidation sell-off since this bull market began over 10 years ago. This open interest liquidation sell off started last year at the end of April. At this point in the cycle the percentage size of the correction is not as severe as a couple of the past liquidation cycles. We are getting near the end. The open interest peaked last April at over 160,000 silver contracts. The o/i bottomed in December around 90,000. The o/i bounce quickly to around 118k. A lot of this was momentum money and this is the open interest long position that JP Morgan makes an illegal living off of. This latest hit is JP Morgan's manipulated hit on the market working off the latest round of "hot" money jumping in the market to try and get the ride in silver from $31 to $34. Those traders are losing money on their long positions and - based on my reading of yesterday's o/i - have started to short the silver market. This is when JP Morgan will cover and the market will move higher again. Likely much higher.
In the meantime, I know these illegally manipulated sell-offs can be gut-wrenching, but you either have to start scale-in buying after the initial big market stop-loss driven drops occur or just look the other way for awhile and hold on tight.