What a coincidence! A short while ago, JP Morgan announced that gold was heading for $1200 an ounce. Today it hovered around $1200 as predicted, and even tested a 3 year low at $1182, before bouncing back to the low $1200s.
Amazing how prescient a prognosticator can be when you control the market place! Tomorrow is delivery day for JPM. Having shorted thousands of contracts in gold, the bank needed the market to shake out the gold bugs who had been holding on for dear life in the current fall, until gradually, stop-loss after stop-loss began kicking in until there was enough in the market to cover the shorts.
The interesting development is not the blatant market manipulation. Why wouldn’t you want to suck every last dollar (or ounce) out of the slide if you controlled the market? The concept of ethics and open market free trading shouldn’t be an impediment. What’s one more potential investigation of market rigging? Nothing happened the last time. Nothing happened in the bailout fiasco. Nobody went to jail. Why not take it all?
The only remaining question is : How much is enough? The below-cost-of-production-prices may have brought a fresh set of bulls into the market, providing enough support to quickly bring the price back up above $1200. JPM is now net long and no more major deliveries or covering shorts are due. Maybe this was enough for reality to set back in. JPM did what it needed to do, and now may be poised to allow, or force, the market back up to where it should be.
Or, maybe there are still some stops left to loosen some significant supply, before they again allow the market to find its own level. The evidence may well be revealed Friday and Monday. If the Hong Kong markets are hit hard by undetermined large sellers, looking for more stops, then the game is still on and there is more pain to come. Interpreting the COT report and JPM’s gold reserves next week will be the indicator.
If they decide that there are enough buyers waiting in the wings at these prices to offset any further downward pressure, we may be looking at the bottom. They made a forceful play in less than 90 days. For those with cash looking for a haven, this may be the time to pull the trigger, and ride it up with them.
In any case, when the fundamentals take over again, the ride up should be spectacular. That is… if JPM doesn’t decide it wants ALL the gold for themselves!