There has been a scandal of sorts brewing over gold and silver short positions held by JP Morgan and HSBC. The two banks are massively short these metals and would never be able to deliver on their contractual obligations due to limited supply of the physical metals. Many a gold and silver bull has long been dreaming of a short squeeze to bring both banks to their knees. Some have resorted to a "put JP Morgan out of business - buy silver" campaign on the net.The Commodities Futures Trading Commission (CFTC) has served up a bit of bad news for those wishing for the demise of JP Morgan et al. Essentially, the commission has voted to leave JP Morgan in a cat bird's seat of not having position limits apply to the giant bank. The vote wasn't even close. It was 4 to 1 against limiting the amount of positions. So, as usual JP Morgan and friends win again. Surprised? Lol.
Time to simply move on from that effort. The banks will win all of the time in terms of rule making in these exchanges where they hold large positions. If things don't go their way they change the rules leaving you to hold the bag. Business as usual. In these markets there is something to be said for taking profits too soon. This is why I never endorse playing around in these exchanges unless you know what you are doing! Physical, in your possession, is the best way to go. If you do not like the volatility of bullion, then it is obvious that you should invest in rare coins.
The carnage of recent days in the gold and silver markets could be worse. But here is the rub - it's something called the Asian put that will keep gold and silver from melting down; the bears will be denied. Simply stated, no matter how hard bearish interests try to pummel gold and silver those efforts will be met with buying demand from Asian investors. I believe that the bottom will soon be in for gold and silver thanks to this Asian put.
In Hong Kong, demand for gold has soared by up to 50%, according to local reports, for gold bars of the kilo size variety. This sudden increase in demand has caused local prices to move three dollars above the spot price, highlighting the tightness of the physical gold market in other parts of the world. The Financial Times of London warns however that the market could cool down due to the Chinese holiday in early February. That would only be temporary, of course, as the fact of the matter remains that gold demand in the US does not operate in a vacuum. It is actually self defeating for certain US interests to undermine precious metals prices as it only enables US competitors to buy those metals more cheaply.