In a recent interview by Natural Resource Stocks, precious metals expert Alasdair Macleod highlighted critical developments in the gold market, signaling a potential "bare squeeze" driven by dwindling physical supply and mounting pressure on short sellers. Macleod, known for his deep understanding of monetary history, dissected the complex dynamics at play, pointing to a confluence of factors that could propel gold prices even higher.
Comex Deliveries and Dwindling Liquidity
Macleod emphasized the significant surge in gold being stood for delivery on the Comex exchange. "Since January 1st, the rate at which the stands for delivery have been increasing has been at roughly four times last year's rate," he revealed. "If the current rate of stand for deliveries continues since January the 1st then the total for this year will be over 2,000 tons this year alone."
This surge, he argued, indicates a growing demand for physical gold, with much of it likely being absorbed and not returning to the market's liquid supply. "I think this liquidity was gone out of the market," Macleod stated, raising concerns about a tightening physical gold supply. He also questioned where the gold from previous deliveries had gone, indicating that the system is losing physical metal.
Short Squeeze Potential
Macleod pointed to the large short positions held by bullion banks and traders on Comex as a key factor driving market dynamics. "The bullan banks the swaps if you like bullan Bank traders who are in the swaps category on COMEX have been short," he explained, noting the substantial value of these short positions. He argued that rising gold prices are putting immense pressure on these short sellers to cover their positions, potentially triggering a "bare squeeze."
"You can see the pressure is going to be on the dealers as it rises," Macleod stated. He described a scenario where traders are scrambling to close their positions, driving prices higher. He pointed to a recent example where open interest on Comex fell significantly while gold prices rose sharply, a classic sign of a bare squeeze. "Earlier this month we had a period where open interest on comx fell from just under 600,000 contracts... fell back down by 75,000 contracts at the same time the price Rose over $200," Macleod recounted.
Central Bank and Asian Demand
Macleod also highlighted the ongoing demand for gold from central banks and Asian buyers. "The central banks have been buying for some time the Asians have been buying for some time," he stated, adding that this consistent demand is further straining the already tight physical gold market. He went on to explain that central banks are moving away from credit-based currency, and into gold.
"As I think more and more people understand the risk is in credit not in a high gold price then under those circumstances I think you're just going to get more and more buyers for the available physical stock which basically is not coming our way," Macleod said.
Market Manipulation and Delivery Concerns
Macleod expressed skepticism about the integrity of the Comex delivery process, citing instances of delays and obfuscation. "I mean it was just coincidental that there was a wonderful piece on Gara which was covered by Gara of this guy who was working as a dealer for sprout and they stood for delivery for some silver and something it was meant to take five days took nine months nine months of prevarication," he stated. He suggested that the current system is heavily skewed towards paper transactions and that physical delivery is not always a smooth process.
Macleod's analysis paints a picture of a gold market under significant strain, with dwindling physical supply, mounting pressure on short sellers, and consistent demand from central banks and Asian buyers. He advises investors to "just keep stacking," emphasizing the importance of holding physical gold as a hedge against the risks inherent in credit-based systems.
Watch the full interview:
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