This week there was a big move to the upside as many moved to cover their short positions. Interestingly Eric Sprott spoke to KingWorldNews of the Central Banks leasing out their gold to bullion banks. Presumably this has been for the purpose of suppressing gold prices to protect fiat currency. But they big question is when the SHTF, will they be able to get it back?

The central banks have been leasing their gold, as Sprott suggests.  But what happens when the central banks realize they are not going to get their gold back?  The people they leased it to are the bullion houses.  The bullion houses then sold it to somebody who wanted physical gold

The bullion houses, of course, were later going to buy the gold back from another source, and return the gold to the central banks.  But what happens when the time comes if there is not enough to go around to return the (gold) to the central banks

This is going to be an explosive move to the upside.  I just do not want to be out of the gold market at this time.” 

Commodity trade, Dan Norcini seems to think that we may be getting closer to that moment faster that you think as the last weeks trading in the gold market showed a lot of shorts were rushing to cover their positions.

“Both of these markets (gold & silver) broke significantly out of those ranges.  They did it on good volume, and they did it, surprisingly, when a lot of people really weren’t expecting them to do it.  This caught a lot of people napping with the intensity of the move, and the ferocity with which they broke out.

You had a lot of traders in the speculative community, and by that I mean the hedge funds, had taken out some pretty good size short positions in these markets.  These guys have been making bearish bets.  They’ve been adding shorts.

Those shorts got hit hard this week, and a lot of them ran for the exits, and the rest is history.  A lot of the momentum players are now in these markets.  That tells us that we should expect, as we move forward, to see dips in price begin to be bought because I think the (computer) algorithms are now in a ‘buy’ mode.

So these guys (shorts) got caught with their pants down, and that’s reflected in this week’s COT report.  Even though the COT only goes through Tuesday, we had some pretty big moves the rest of the week, so I expect we had significantly more short covering taking place this week than what’s on that report.


You had a large amount of short covering in gold take place, and new longs come into that market as well.  Their net long position has jumped about 28,000 (contracts) in one week’s time.  That’s a big jump.

Norcini expects more speculators to come piling in which will cause further damage to anyone with a short position.

They (speculators) are coming back (into gold) with a vengeance.  They are coming back in at very low levels of exposure to the long side of the market.  There is a lot of room for these guys to come piling into the market.  There is potential for a very strong move upward as these funds begin to rebuild their positions on the long side.

If we clear $1,680, you’ll see some short covering above $1,680.  But you’ll see a significant amount of short covering, of a panic type nature, if gold goes through $1,700.  In other words if gold gets a ‘handle‘ of 17 in front of it, and gold refuses to break back down, the shorts are in trouble and they know it, and you are going to see them come out of there very quickly.”

Source: King World News