We are in extraordinary times. It’s a battle of shorts v longs. Over the last few weeks the big bullion banks have piled on their short positions in both silver and gold to historically high levels. On the other side we have a world dishing up reason after reason to own gold and silver with the ‘real’ market buying (going long) and maintaining prices in the face of all the shorting. This week was providing 2 key events that could see a break out on gold. Last night’s US Fed minutes and today’s Indian budget where Modi may or may not remove the restrictions on gold. Last night the Fed said they would finish QE in October and were still working out their exit strategy re interest rates. That was a perfect opportunity for the bullion banks to hit the gold price but yet again it defied and rallied higher. If Modi removes or reduces restrictions it should be tremendously bullish for gold.
Right now we have, just to name a few: debt/easy money fuelled and central bank supported equities markets in bubble territory; bond markets scaring many economists; geopolitical conflicts all over the middle east, Ukraine, and China/Japan; attacks on the USD from Russia, China, France, Iran, South Korea etc; Eurozone faltering with serious bank issues in Austria, Spain, Greece, Germany etc and the ECB yesterday reconfirming they are ready to start their own money printing exercise as things get worse not better; the US recovery driven by misrepresentation of data and blind ‘belief’ on the eve of QE ending and the consequences of that yet to be seen yet seemingly unavoidable; Japan hurtling on with money printing and the world’s highest debt to GDP ratio, and finally China (who got us through the GFC) showing very real signs of slowing and struggling with its own massive debt bubble. It is by no means an exhaustive list but merely an insight into just some of what is pulling the ‘natural’ long forces against the ‘orchestrated’ short forces of the banks. Even if the banks win this one with all their ‘paper’ trades most gold commentators are now calling that the last price plunge before the gold and silver rocket takes off. Take the strain….. pull!