PMs in the eye of the storm
An uneasy silence has descended on gold and silver, but the forces that will drive them higher are mounting. Both metals are being rapidly drained from paper markets.
The monthly cycle of Comex contract expiry has come round again, an incentive for the shorts to mark prices down to make call options expire worthless, shake out week holders, and have a favourable end-month valuation for their positions.
This morning in Europe gold was $4690, down $145 from last Friday’s close and silver at $74.85 was down $5.90. Comex volumes for this month in gold have been very low, while there was better volume in silver. This contrast is illustrated below:
Comex gold probably reflects speculators having difficulty assessing the impact and consequences of the Gulf war. This is confirmed by open interest being extremely low, the black line in the chart below:
The disinterest from traders is against a background of persistent US exports of gold, reflected in Comex warehouse stock levels:
Additionally, US gold mine output is not recorded in the Comex statistics, but is going predominantly to Switzerland for refining into Chinese standard bars to be sent on to guess where? The next chart from Forbes published on April 7 puts the accelerating gold drain even more graphically:
While we are looking at gold prices wondering if we should buy or sell, the Asians particularly the Chinese are draining all America’s physical liquidity leaving it an empty paper shell — rather like an abandoned wasps’ nest. That’s bad enough, but the situation in silver is even more stark.
The chart below shows Comex open interest is still at 20-year lows:
