Monday, May 24, 2010

Compelling Evidence For A Big Move In Gold This Summer?

Trader Dan Norcini has outstanding commentary on the gold/silver markets (and other commodities), which can be found at  One aspect he monitors is the weekly Commitment of Traders report. Over the past few weeks he has uncovered a potentially extraordinary development which could support a very big move higher in the price of gold.

In summary, the swap dealers - the bona fide trading desks at banks that make markets in gold, paper vs. physical, for bona fide commercial users/hedgers - have been aggressively covering their net short position, in contrast to the proprietary "cartel" desks at banks, which have been increasing their paper short positions in an attempt to cap the price of gold/silver. In my view, based on Trader Dan's empirical analysis, I believe this is more evidence that the Comex paper fraud is moving closer to GATA's "commercial signal failure," which occurs when the demand for physical gold completely overwhelms the ability of the paper shorts to deliver the actual goods. Here's Dan's excellent analysis:  Gold: Look Out Above?

One possible interpretation of this is that the swap desks, because they deal in both paper and physical gold, have a first-hand view of physical availability and are attempting to reduce their exposure to the growing shortage of physical bars in both London and NY by reducing their net position and actually increasing their long position in later months, as pointed out by Dan.  This would be consistent with the ever persistent reports out of London, and the actual delivery experience of our bullion fund, of delivery delays and an increasing tightness of physical supply.

I have been discussing with long-time colleagues the possibility that this summer may experience a big move higher in gold, contrary to the seasonals, as Europe and the U.S. continue to melt-down fiscally and economically, and the world continues to shift from fraudulent paper currencies into the safe haven of physical gold and silver.  The COT report, as per Trader Dan, adds more evidence to support the view of a big move in gold soon.

UPDATE:  This highly esteemed James Turk published commentary which echoes the view about a possible summer rally:  "Few people expect silver prices to rise during the summer, which is normally considered a quiet period for precious metal prices. Maybe the big surprise this year will be a spectacular summer rally for the precious metals. After all, that is what the silver chart is telling us."  I recommend reading his commentary HERE


  1. Dave: there are a number of "this time is different" scenarios out there now.

    First, of course is the basic supply demand issue to which one must add in the paper situation.

    Second: the US currency debt situation which we have pretty well beaten to death but most of the public is in denial.

    Third (and it all ties in) is the changing US economy--I not sure what it is bit it certainly is not as robust as one from DC would lead you to believe. Unemployment is stubbornly high even with the alleged stimulation. Retail sales are touted as improving but we needed housing stimulation to help accomplish that.

    Fourth-more stimulation in process--if all is ok-why spend 200 Billion? (with all the trillions of debt what's another 200 billion anyway (poor Ev Dirksen is rolling over in his grave)

    I think you as well as others are in the camp where we will see a higher SPX (if that's considered to be a true measure of anything) but more a result of currency depreciation. Or paper inflation or whatever we want to cal lit--its not real money.

    Could go on but we all get the idea. I just wonder when PM becomes real scarce and not just at comex, et al.

  2. Dave, not that while precious and industrial metals have been smoked the past few weeks, tungsten has just broken out to a new 52 week high. I guess one way to make physical delivery is with tungsten-filled slugs, and someone is hard at work making then currently (probably to sell to retail, who doesn't know any better).


  4. All your points are excellent, Hal. That Bob Janjuah character who zerohedge worships thinks the Fed will be forced to announce a $3-5 trillion QE program later this year. I agree.

  5. goes back to the Jim Willie List

  6. Did everyone watch the USD rollover today?LOLX10

  7. "That Bob Janjuah character who zerohedge worships thinks the Fed will be forced to announce a $3-5 trillion QE program later this year. I agree". -DID

    Dave, did you also read he said the USD and treasuries are going up to boot! I agree.

    LOL.LOL. Can´t have the fruit without the flies amigo.

  8. So does this mean the commercials are being sacrificed to bail out the swap dealers? One of them has to bite the bullet.

  9. Anonymous, I would say the swap dealers are being forced to cough up physical and are hedging their shorts by getting longer on "out" months. The commercials keep selling paper to the specs and the swap dealers. Go to and read his latest piece. It does a brilliant job of explaining what is going on.