I haven’t seen anything so far this month in the price action of the precious metals that indicates any big changes are in the works coming up on June 28 when the Basel III regulations kick in. At the moment it seems like the “same old, same old” type of price action to me.
It’s certainly true that the Big 4 shorts are starting to show some signs of heading towards the exits in the last two COT Reports — and their situation has undoubtedly improved further after the engineered price declines on Thursday. But they’ve gone inches…when they need to go miles.
There’s still only two ways out of their predicament — and that’s to cover by purchasing offsetting long contracts, driving precious metal prices to the moon in the process…or delivering physical metal and closing out their short positions that way.
That might be possible in gold, but in the other three precious metals, you can forget about it, as the physical supply to do that just doesn’t exist.
And even if it did exist, purchasing enough to cover would drive the physical prices to the moon in the process. They’re stuck on the short side with no way out that won’t drive the four precious metal prices to the moon and the stars.
And not to be forgotten in all this, as Ted has pointed out to me quite a number of times, is that not all those entities that are net long the COMEX futures market are in a position to take delivery. This would include those net long in the Managed Money and Other Reportables category, as they only trade paper. They only respond to price action — and their business models/charters do not allow for physical delivery under any circumstances.
There is one other way out the Big 4/8 shorts that I mention from time to time — and that would be if the COMEX was closed for trading in the four precious metals. They would then trade in the spot market only, like most of the platinum group of metals do now…think rhodium…without futures and options contracts attached to them. But the chances of that happening are remote at best…but it is an option in extremis.
That would save the Big 4/8 traders — and all the other shorts as well, as their wouldn’t be any financial meltdown of the bullion banks and investment houses involved on the short side…unless the Exchange Stabilization Fund is prepared to bail them out at taxpayer expense. And what an expense that would be!
We’re only about three weeks away from Basel III coming into effect — and everyone seems to have an opinion on what it will or won’t do for the precious metals. I’ve posted some of them in my column over the last week or so, along with my own qualifying comments. Here’s another one by Adrian Day headlined “
Basel III is Coming, and That’s Bullish for Gold” that I found posted over on Doug Casey’s internationalman.com Internet site on Thursday.
Could it be bullish for gold — and the other precious metals? I, along with everyone else, is cheering for it, that’s for sure. But the fact of the matter is that nobody knows exactly what’s going to happen.
It’s possible that all this price management we’ve been witnessing for the last year or so is just to keep precious metal prices in line until this accord goes into effect.
But will things change instantly when the clock strikes midnight in Europe on the evening before, or will this change happen over a longer and more drawn-out period of time? Don’t forget, this accord doesn’t go into effect in the U.K. until January 1 — and the LBMA has already announced their displeasure with it. Their 7-page comments on it are linked
here.
But what happens in Europe and London is somewhat of a sideshow, although I freely acknowledge that in certain respects they are connected to the goings-on with the New York bullion banks in the COMEX futures market, as they are also active in London and Zurich — and other major world financial centers.
But Ground Zero for the price management scheme has always been the in the COMEX/GLOBEX trading system. That’s where the precious metals prices are set — and it’s only what happens there that really matters. Whether Basel III will have a direct or indirect affect in this market…immediately or over time…is what I’ll be watching for.
I spoke to this issue in my column back on the May 25 — and I wouldn’t change a word of what I said back then, which is as follows:
“Everyone, it seems, has an opinion on this issue — and more are soon to follow in the days and weeks ahead…but I seriously doubt that anyone knows how this is going to shake out. I certainly don’t.
But one thing I do know for sure is that this price management scheme in the precious metals in general — and silver in particular, cannot go on forever. So therefore it seems possible that this Basel III agreement may be the event that the powers-that-be/deep state/New World Order crowd can point to when the whole thing finally does end. But even that is speculation on my part.
So where I stand on this is simple. Let’s see what happens as time moves along. I’ll let others lead this parade…whether they’re qualified to speak to it or not.”
But even as I sit on that proverbial fence, my bias is showing. Nobody wants to see this generations-long travesty of justice to end more than me — and if this Basel III accord is the instrument that brings it about…then I’m all for it.
So we wait some more — and I’m still “all in”.
See you here on Tuesday.
Ed