The short squeeze in gold intensifies

The bullion banking establishment, the ultimate insiders, expect higher gold prices. They are positioning their books to avoid getting caught out when speculator demand returns.

It is remarkable that speculative interest in Comex gold futures is minimal. We can judge this from open interest, which is the sum of all long positions — managed money, other reported, and non-reported categories, plus minor longs recorded in the producers and swaps.

As a rule of thumb, when open interest is high it reflects an increase in speculators expecting higher gold prices. It is typical of bull markets that open interest remains high tracking the price, and when it gets excessive prices are due to correct. But what of the condition currently in gold futures, where the price keeps going higher, while open interest declines?

It is remarkable that gold is not being driven by increasing speculation. Speculator interest is clearly diminishing. Not even momentum traders seem to be taking part. The same is almost certainly true of London’s forward market, which tends to hedge long positions by going short in Comex futures. We can therefore conclude from Comex open interest that long positions in London are lower than normal.

It is clear that lack of physical liquidity is the common factor driving prices in both markets. Hidden from us is strong physical demand taking out free floats from mine and scrap production and absorbing the minor sales which we see all the time in any market. And when it’s bought its gone, hoarded until dishoarded.

It was also interesting that at the recent LBMA conference in Kyoto that a straw poll of attendees reckoned gold would rise to an average of $5000 in 2026. They see prices continuing to rise, which is bound to reflect their own positions. In other words, they are and will continue to be careful not to go short, maintaining balanced to long net positions.

It appears that hedge funds and other speculators are unaware of the consequences. For the first time in recent memory, the establishment is indicating by its collective actions that gold prices are going significantly higher, yet the signals are being ignored by speculators. Furthermore, when the speculators wake up and because the establishment will refuse to go short at anything like current levels, the gold price will be marked up rather than futures demand supplied.

Lots flow from an understanding of this extraordinary market position, which will wait for other days. But the focus of this brief article is to draw attention to a fascinating market position which is being ignored by the big speculative money.

The situation in silver is equally fascinating, which I will cover in my regular market update tomorrow. Meanwhile, feel free to forward this article to anyone who you think will benefit.