Yesterday when gold was trading in the $1570
we suggested that
based on the very volatile shifts in the funding environment for gold,
whereby the gold lease rate had moved from record negative to borderline
flat, the plunge in the yellow metal is likely coming to an end. Less
than 24 hours later, gold has just passed $1600 yet again. And as the
following note from Sandeep Jaitly of First International Group (whose
interview with Max Keiser exposing
economics for fraud back in June was quite the hit) observes, by
analyzing the continued funding unwind pressure, the recent liquidation
move in gold is one that has to be taken advantage of. To wit: "The
movements in the bases confirm that the recent downward move in gold
against Dollars was as a result of Dollar funding pressures.
Gold
was lent on the swap against United States Dollars. This swap must be
unwound and where a bid for gold was sought to raise Dollar liquidity,
an offer of gold will be sought to unwind the swaps. The
co-bases for Feb-12 and Apr-12 gold contracts are starting to advance –
an exceptionally bullish signal following the selloff and a sign that
physical buying is being prompted by these lower prices.
It would be very prudent to accumulate gold against United States Dollars aggressively over the next fortnight."
From First International Group, Gold Basis Service
LONDON, Thursday 15th December, 13:43 HRS BST. Spot gold is currently
$1,584.25/45, and the gold/silver ratio is currently 54.56/54.63. The
conclusion from the last missive sent on 23rd November read:
“The movements in the December gold bases are still pointing to
further upside for the gold price in fiat currencies – especially the
Dollar, Euro and Pound Sterling (note the drop of just referring to the
United States Dollar.) The ratio of the December gold/silver bases is
pointing to downside for the gold/silver ratio.”