We Are Still In The Early Stages Of Major Currency Devaluations
By: Miles Banner
For the year the gold price is up 10.25% in US dollars, 22.38% in Euros, and 27.85% in pounds (London PM fix). The HUI gold index is up 13.38% and the SPDR gold shares (GLD) is up 9.61%.
In the aftermath of the recent bail out by the IMF and ECB the markets are continuing to undermine the euro.
On Wednesday the Austrian Mint told Reuters that they had sold more gold in the two weeks from 26th April than in the whole first quarter of this year. They went on to say that this demand was coming exclusively from Europe.
Despite this increased demand from Europe the gold price has been held from spiking dramatically as bullion banks have rallied to short it.
The bullion banks go big on shorts
In opposition to Europe’s surge in demand, last week’s Commitment of traders (COT) report showed bullion banks are still building huge short positions, betting against a rising gold price. The producers/merchant net short positions for gold commercials are at an all time high.
Bullion banks have traditionally taken short positions in the gold futures market. This theme has been ongoing for many years. Nonetheless the size of these positions makes us cautious.
The last time they took a similar number of net short positions was back in November 2009, just before the recent correction. With gold prices today at record highs and the problems with the euro and pound driving demand it appears these prices are sustainable.