GOLD
The primary driving force for the gold price is COMEX positioning, which is strongly suggestive of an impending rally. I am also struck by the continued liquidation or decline in holdings in the big gold ETF, GLD. Yesterday’s 240,000-ounce withdrawal from the GLD gives me pause and suggests that a large buyer may be converting shares to metal to avoid SEC reporting requirements. A large buyer seeking to accumulate gold without notice is not a bearish development and reinforces the positive setup existing in gold.
What makes the prospect of a short squeeze in gold loom larger than normal is the fact that the commercials (big banks) are less short and the managed money traders are more short than ever. That means that there has never been a better time, for the commercials, to rig gold prices higher under the cover of physical gold tightness.
Finally, sales of Gold Eagles and Gold Buffaloes from the U.S. Mint have exploded to the highest levels in years, starting in June and continuing through July. It would not surprise me that if the buying surge continues, the Mint may soon have to ration sales of gold coins. I don’t think these sales result from retail demand. A single big buyer (JPM) was likely responsible for record sales of Silver Eagles over the past four and a half years. That now seems to be the case with gold coins over the past two months.
Someone is buying gold (and silver) coins from the Mint and if it isn’t the public, then it must be a much bigger buyer. We have all these bullish factors on top of a record managed-money short position. That’s another way of saying the price lows in gold are in and we’ll be going up soon.
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