Looking For a Squeeze
Even though he knows it's dangerous to venture into the Hall of Falling Knives, The Turd proudly gazes into his crystal ball and foresees the following:
It simply makes very little sense for the metals to decline much further here. Yes, I know that we are talking about the paper price and the paper pits are now entirely ruled by Monkeys and WOPRs, but, stick with me on this.
Total gold open interest has surged by nearly 9,000 contracts on Tuesday and Wednesday as price declined by nearly $45. Andy Maguire tells me, and the Bullion Bank Cartel is fully aware, of the massive orders for physical metal below $1600 in gold and $30 in silver. Huge demand. Therefore, it would be nonsensical for them to be adding shorts here. This surge in OI and accompanying price drop has to be spec/WOPR/weak-handed shorts. Has to be. And remember, for every new short, there's also a new long. Just whom, do you think, is on the other side of those new shorts? Has to be The Cartel.
So, let's see. Does The Cartel have any incentive to spark a short-covering spike in the same manner that they've always caused long-liquidation selloffs?
- If the spec money is allowed to continue driving paper price lower, ever larger amounts of physical metal will be purchased by the likes of China, India et al, further depleting the vaults (and leverage capability) of The Cartel. Driving price back higher will slow this demand...for the time being.
- The Cartel is long 9,000 contracts new contracts. I'll let you do the calculation of how much money they might make by scaling back out as prices rally $50 or so.
Anyway, that's all for now. I've got stuff to do and what-should-be a very interesting podcast to record for release later today. Have a great day! TF