Andrew Maguire - LBMA Shorts Will be Forced to Take Losses

Read this article on fractional paper gold trading vs. the physical bullion market. 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/6_Andrew_Maguire_-_LBMA_Shorts_Will_be_Forced_to_Take_Losses.html

CFTC and financial regulation reform

If CFTC Commissioner Bart Chilton is correct, position limits will be imposed and enforced for derivatives trading on commodities in the COMEX Exchange. Let's see if they enforce these new laws in the precious metals pits, forcing the big bullion banks (JPMorgan Chase and HSBC) to unwind their huge naked short positions.

I'm still wary of Commissioner Chilton's enthusiasm because CFTC Chairman Gary Gensler has talked a good game, but has been slow to respond to complaints of price manipulation. He's also a former executive at Goldman Sachs. Having said that, his predecessors were asleep at the wheel for decades--probably complicit in the price suppression schemes of gold and silver, so at least his acknowledgment that futures markets need more scrutiny against price manipulation is somewhat encouraging.



http://www.youtube.com/watch?v=K1_q88rlUkw

Gold in backwardation--again

I noticed gold went into backwardation against late Friday, signalling another run up in price in Asian trading this morning (it's Sunday night in the US right now). I've written several blogs on backwardation (please do a search for details), and what it infers. In normally functioning commodities markets, a contango exists where the spot price is lower than forward contracts, to account for storage, insurance, and security costs. This is normal in assets like crude oil or precious metals.

But when there is a physical shortage, and when buyers of forward delivery contracts demand physical delivery, in lieu of cash settlement, sellers have to scramble to find said inventory. This causes prices on the physical market to be bid up, which signals price bullishness.

Sure enough, gold and silver prices are trading up in Asian markets this morning. The huge short positions by the bullion banks will either cause a sharp pullback, or they are about to be stampeded by the long speculative funds and central bank gold buyers.

Barrick accelerates unhedging its gold positions

Barrick Gold, the world's largest gold producer, announced last month it was removing its hedge positions over the next year, as the hedges were dampening profitability in an environment of higher gold prices. In a Bloomberg interview, Barrick's CFO said it plans to accelerate the de-hedging strategy, buying back gold bullion and closing out short positions.

http://www.reuters.com/article/basicMaterialsSector/idUSL272564320091102

Translation: one the world's biggest gold shorts (at least they produce gold, instead of naked shorting it) is not just walking away, but RUNNING FOR THE EXITS, in anticipation of higher gold prices.

I wonder what the naked shorts at JPMorgan and HSBC are thinking right now. Hint: expect open interest (new short contracts) to explode over the next several days, as the shorts double down in an attempt to surreptitiously suppress COMEX gold and silver.

Either that, or the shorts will get trampled, which is an eventuality. A COMEX "failure to deliver" will occur within the next few years, but these IMF gold sales may ultimately leak back into the open market, causing a temporary decline. But there are just too many institutional and retail buyers worldwide to sustain a meaningful correction. The secular bullish trends in gold and silver are still intact.

Good luck to all.