Market Report: Squeeze On the Swaps

by Alasdair MacLeod
Gold Money

Gold and silver were not much changed on a dramatic week. In European trade this morning gold was down $5 at $1690, and silver was down 28 cents at $15.12 from last Friday’s close. There is still a large gap in the performance of gold and silver on the year so far, with gold up 12% on balance and silver down 16%.

This gap says it all: the problem is gold, with the bullion banks’ trading desks net short and unable to close their positions. The last commitment of traders’ report (7 April) showed swap traders (aka bullion bank traders) net short of 165,678 contracts, illustrated in our next chart.

[…] We wait with keen interest for an update tonight, but net shorts seem unlikely to have reduced to less than 100,000 contracts, historically high with only two exceptions: July 2016 when gold rallied $330 from an extremely oversold position and following the dramatic run that started in October 2018 to the present day. Our next quest is to identify whether it is a widespread problem, or one concentrated in just a few bullion banks. And here we note that the four largest traders were net short 176,658 contracts, and the second four net short 64,327. This indicates that one or more large traders have been badly wrongfooted rather than shorts being evenly spread over all trading desks.

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