August 12, 2016
Yesterday King World News reported that a major swap dealer, who is heavily upside down on short positions in the gold market, is now in trouble. KWN then posed the following question:
In fact, this was the Bank for International Settlements (BIS) intervening in the gold market to assist the battered commercial and swap dealer shorts. What has taken place in the gold market has indeed been historic. Commercials banks (acting as agents for the Federal Reserve) have been aggressively shorting the gold market at all-time record levels. But the Fed and the commercial banks did not anticipate that global demand for gold would skyrocket the way it has…
Gold has already surged more than 25 percent in 2016, and investment demand has been soaring, as sales of gold coins from the U.S. Mint have now soared a jaw-dropping 84 percent. In fact, investment demand for gold has now surpassed jewelry demand for the first time in history.
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Investment Demand For Gold Is Global
But it’s not just investment demand from the United States. With negative interest rates picking up steam in Europe, many Europeans have been flocking to the safety of gold, especially in light of the dangers of holding capital inside the fragile European banking system.
It is quite clear that after completing an extended mid-cycle correction (similar to the 1970s, although longer in duration), gold has now entered the second leg of its historic secular bull market and is headed to new all-time highs. During these bullish advance, the Federal Reserve and their agent bullion banks fight a war of slow, and sometimes not-so-slow, retreat.
The bottom line is that the massive physical demand for gold has been a nightmare for the gold shorts up to now. It will be very interesting to see how the price of gold trades in the days and weeks to come. Summer is normally a time where the precious metals markets take a breather. Could this be the August that surprises the gold bears and torches the shorts? Only time will tell.