Bullion banks dump their gold and silver short positions ready for the coming rally in precious metal prices

Bullion banks have massively scaled back their short positions in gold and silver during the recent price crash and are now well positioned to profit from a rally in precious metal prices, according to the latest TF Metals Report.

It concludes: ‘The Bullion Banks have now reduced their net liability in gold by over 75 per cent and, in silver, by over 83 per cent… all since the game-changing announcement of QE last September’. This has been an eight-month unwinding program with the last phase being the price manipulation and crash in April.

Shorts down!

Silver shorting has crashed from 7,350 to 1,297 tonnes. Gold shorts are off from 737 to 184 tonnes. That is an amazing turnaround. The short position overhang has almost gone.

Some readers of ArabianMoney might recall our old favorite gold guru Jim Sinclair telling us back in October last year that this was happening (click here). Once again the maestro is right though the April bear raid did seem a nasty twist in this tale that even he did not anticipate.

However, the message from the futures pit is clear and simple. Bullion banks will now be looking to rebuild their long positions in the precious metals during the quiet months of the summer when gold and silver prices are lowest. Long positions are also low right now.

Expect the bullion banks to begin pushing prices back up again just as soon as this job is done, most probably in September unless other global financial markets take a tumble. Other things being equal the lows for gold and silver must already be past or very close at hand.

Bank of Japan’s QE

What we can see in all this manipulation and deliberate manouvering – and be fair to the central banks the Bank of Japan’s QE program did require some action to dampen inflationary expectations – is that gold and silver prices will soon get their mojo back.

After all, nothing has changed with the fundamental case for precious metals except that the BoJ has starting printing money at three times the speed of the Fed. In that context even if the Fed pulled back on QE, would it really matter?

Gold and silver are a money that no central banker can print. But they can bash the price down for short-term advantage only. Otherwise printing paper money can have only one effect on gold and silver prices, they will go up and up!

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