James Turk – The Price Of Gold Is Being Manhandled On The Comex But Here Is The Surprise

With gold and silver consolidating recent gains, today James Turk told King World News that the price of gold is being manhandled on the Comex, and he also discussed what is important for investors to be aware of in terms of how this will end.

James Turk: “What we have seen over the past week in the way gold has been manhandled on the Comex is truly astounding, Eric. The shorts piled on and then piled on some more by selling a record amount of paper-gold futures contracts, stopping gold from hurdling above $1,300, which it looked destined to do…

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James Turk continues: “We know what is happening on the Comex from changes in gold’s Open Interest, which records the total number of outstanding futures contracts. With each contract there is one person long and one person short.

We have seen many times in the past how the Open Interest builds and builds as new buying comes into the market. In a market that is not controlled, the gold price rises as a result. While there is a seller for each buyer, the seller in a free-market needs to keep in mind their objective to make a profit. Therefore, the selling is not relentless because some sellers will cover their position to protect capital, while other sellers wait in the wings looking for an entry point at a higher price.

But In A Controlled Market…
In a controlled market, these Open Interest increases can cap the gold price and keep it from climbing, which is what happened last week. The seller was not profit motivated nor worried about protecting its capital. It just kept selling relentlessly, and the Open Interest soared.

The gold price rose $2.70 on the week. But the gold Open Interest on Friday’s close to the previous Friday rose nearly 20%, which is the astounding bit. The shorts kept selling and selling to keep gold capped below $1,300. It didn’t matter how many contracts they needed to sell to meet their price capping objective.

Yesterday the longs eventually got the message that they were fighting a powerful force. So when that happens, to protect their capital they give up and sell their position, which gathers pace and size like a snowball rolling downhill. And who do the longs sell to? It is the same shorts who capped the price. To cover their short positions, they buy from the now discouraged longs who are nervous to exit quickly to protect their capital from losses. The Open Interest as a consequence shrinks.

Who Are The Shorts?
So it is logical to ask, who are these shorts that capped the gold price? But I think everyone reading KWN knows the answer. After all, look at the math involved in taking on such a big position. The Open Interest over the week increased by about 95,000 contracts, so that represents 9.5 million ounces of gold, or about $12 billion worth of paper-gold.

Big institutions and spec traders have position limits that prevent them from taking positions larger than 6,000 contracts, which is just a small percent of last week’s total increase. So it wasn’t the big institutions and the specs who were capping the price.

Only banks operating for central banks can accumulate such a huge increase in Open Interest. They pretend they are hedging and therefore fall outside of position limits. So it is clear that the central planners told their agent banks to keep selling paper-gold, even if it was going to take a record amount of selling in order to keep gold under $1300.

So what can you do? Don’t bother writing to your Congressman or the Commodity Futures Trading Commission. Accept the fact that the paper-gold market is rigged and therefore simply avoid it. When you buy gold, buy physical gold. Stay away from paper-gold futures and all the other forms of paper-gold.

The Surprise Ending
It all goes back to what you and I have discussed before. Use dollar cost-averaging to buy your physical gold because the central planners will be overrun, just like they were in March 1968 when they could no longer cap the gold price at $35 per ounce. And we all know how gold exploded after that event and climbed higher for the next twelve years. History will repeat.”

King World News
May 11, 2016