Bill Murphy at Le Metropole Cafe ( www.lemetropolecafe.com ) has nailed down what the gold market has been all about for a fair number of years, since the late '90s. Here is a little about what has been recently going on in the gold market from Monday's market wrap up:
"The reasons why gold is doing what it is have been brought to your attention in recent MIDAS commentary. A quick review of some and some adds:
*New physical market buyers are overwhelming The Gold Cartel’s ability to keep the price from rising.
*Many of the gold shorts who used to trade along with The Gold Cartel are running for the hills as fast as they can.
We know this to be the case based on the latest COT [Commitment of Traders Report from the Comex] and gold open interest numbers. This was CONFIRMED again today as the gold OI [open interest on the Comex] fell 6125 contracts on Friday to 335,165. Thus, you have traditional shorts trying to cover as physical market buyers attempt to fill their own orders. Both are competing against each other on the buy side to get long and cover shorts.
The ramifications of this development are somewhat staggering. As mentioned for some time now, there is room for 100,000 new spec longs [IO on the Comex is about 100,000 less than it has been at the last previous high in Gold] to come pouring in on the buy side to send the price sharply higher from these levels. Many of the would-be buyers are just watching, not doing anything yet. Many WILL when gold takes out its 1983 high in the $510/$511 area (could do so tonight). Gold could explode from there as more of the shorts PANIC!
*As veteran commodity traders fully appreciate (any market for that matter), the best bull markets are when a market makes a substantial move to the upside and few in the investment world understand what is really going on. As Café members fully know by now, that is the case with gold … the worst reported on and least understood market in history. 90% of the material written on gold does not even reach the 6th grade level in terms of content. It is truly nauseatingly pitiful.
*Gold is moving on its own. When it receives a serious tailwind from a falling dollar, etc., it can only support the already advancing price. We received a little of that today. Oil finished up 59 cents per barrel at $59.91. The CRB gained 2.06 to 325.44 (not far off multi-decade highs even with a comatose grain market). The dollar dropped .43 to 91.45 and the euro rose .79 to 118.01."
GATA (Gold Anti-Trust Action Committee) has the full story on the multi-year suppression of the price of gold. Once you understand the full story of gold, you will realize the enormous upside potential that gold and silver has.