Why Does Market Maker Bullion Bank Fail For New Records Gold?

The run to all-time highs in gold is getting very close now, measured in weeks. Gold futures, the fall of a major bullion bank, and JNUG stock price at https://www.webull.com/quote/nysearca-jnug action in the gold mining sector all point to an imminent upside jolt in gold prices up to, and perhaps even past, records in dollars. Gold is already comfortably past all-time highs in Swiss francs, euros, yen, Chinese renminbi, and pounds. The only laggard is the US dollar. Gold is priced on different currencies since the September 2011 highs. Gold has been in a gentle correction since April 14 when it hit highs of $1,790.

Bullish action in gold stocks

  • Since capitulation in gold mining stocks in mid-March, space has exploded higher by nearly 70%. This by itself isn’t all that surprising or indicative of an imminent move in gold because miners were extremely oversoldback then and a bounce was to be expected.
  • Some mining stocks fell back very close to bear market bottom lows hit in December 2015 while gold itself went nowhere near its lows at all. Gold stocks have continued trading higher by nearly 10%.
  • Mining stocks are tending to predict moves in the underlying metal, and this time will likely be no different.

Open Interest Fails to Dent Gold

  • When open interest is contracting on the COMEX, the gold price is tending to fall with it.
  • Bullion banks are selling gold futures fractionally backed by physical gold. Buy these are contracting back at a profit as the gold price falls, which is caused the concurrent contraction in open interest. There are a few charts that show this clearly.
  • First, open interest and gold prices are the April-October 2008 correction that they could technically be calling a bear market since it was a correction of over 20%.

Bullion Bank Market Maker Folds

  • The Bank of Nova Scotia (BNS) is one of the listedas one of 12 market-making members of 143 total of the London Bullion Market Association.
  • The bank is closing the metals trading desk and it is shutting down entirely. Not selling it or otherwise offloading it, just simply ending it.
  • It will be very interesting to see the bank’s next earnings report on May 26 to see how much losses it suffered in the gold futures market this quarter.
  • Something tells me the losses will be quite large. Otherwise, the bank wouldn’t be scrapping the entire operation without getting a penny for it.

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