by Alasdair Macleod, Gold Money:
The purpose of this note is to draw attention to the extreme technical positions in the market for gold and silver. The information is derived from the weekly Commitment of Traders reports, and the monthly Bank Participation reports. It should be noted that while these are the most complete sets of market reports available they are essentially of hedging and speculative activity, which is not the same as physical demand. Nor do they cover other paper markets, some of which are growing in importance, such the Shanghai Gold Futures Exchange.
The background to these markets has been one of a shortage of physical stock, certainly from the beginning of 2013, if not before, due to escalating Asian demand. The end of the bull markets for precious metals occurred in late 2011 but there was no material liquidation of physical gold in the west until the concerted bear raid in April 2013. Since then ETF physical liquidation has been insufficient to meet growing Asian demand for physical gold, which has been met by central bank sales. The position in silver is more complex given the industrial demand component, but demand patterns for silver investment appear to have broadly coincided with gold.
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