Saturday, October 1st, 2016 MST

Swiss gold sales get more press

The Swiss National Bank announcement that it will be selling 250 tons of gold over the next two years continues to get a lot of press. However, the gold market is treating the news with disdain. Overnight in the Asian markets, gold rose to its highest levels in more than a week with gold hitting an intraday high of $656.50 an ounce before declining to $656.20/oz. Meanwhile, silver hit an intraday high of $13.28/oz overnight in Asia, silver’s highest prices there since June 8.

The real determining factor for the price of gold is the value of the dollar, the world’s primary reserve currency, not who is selling gold. At CMIGS, we have always maintained that the reason for buying gold is the deteriorating dollar. The fact that the US is doing nothing about its deteriorating financial state of affairs and may yet get involved in a third war overwhelms any additional gold sales, even if the sellers are the Swiss.

Gold and silver have been the ultimate hedges against currency debasement since the inception of paper currencies, and Asians well know that. Further, Asia is awash in dollars, and what better time to buy than when someone else announces a sale?

LCs decrease net short position by 28%

Meanwhile, large commercials (LCs) decreased their net short position by 38,391 contracts or 28% for the weekly reporting period ending Tuesday June 12. This is considered bullish as it is commonly believed that the LCs have a crystal ball when it comes to short-term swings in the price of gold. When LCs see lower prices ahead, they increase their short position; when they see higher prices ahead, they reduce their net short position.

Some readers who have followed the activities of the LCs may say that the LCs determine, or at least greatly influence, the intermediate moves in the price of gold (and silver). This writer would not disagree with that assertion. Regardless, big changes in the LCs net position can portend signficant price moves in gold and silver.

For an excellent, but lengthy, analysis of the gold and silver markets, with extensive commentary on the LCs net position changes, read resourceinvestors.com’s Got Gold Report, which appears biweekly.

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