Failing to bounce from last week’s hit

Last Thursday and Friday, gold fell nearly $100, and silver by $1.60. This week saw what traders call a dead cat bounce: in other words, there was little recovery from these falls. On the week, gold was down $2unchanged at $1862 in European trading this morning, while silver was down 23 cents at $22.10. These moves coincided with a small recovery in the dollar’s trade weighted index, which appears to have caught the pair-trading hedge funds off guard. But Comex’s Open Interest in both metals is low, indicating that they are oversold. The next chart is the position in gold.

Clearly, downside from here in the gold price appears limited, the weak hands having been shaken out. Volumes have declined, but rock solid buying every time the gold price dipped to $1900 has obviously evaporated. The danger for bulls is that the Swaps, comprised mostly of bullion bank trading desks, can continue to mark prices lower without being challenged.

Traders relying on position information are flying blind, because the CFTC’s COT reports are still suspended following the cyber-attack on financial software provider, ION. Euronext’s COT report has also been suspended for the same reason. It seems ION has paid a ransom to LockBit, confirmed as being behind the attack. LockBit appears to be affiliated with the Russian government.

In both the US’s CFTC and Euronext, regulated futures exchanges in western capital markets are being attacked by a Russian affiliated ransomware organisation. Besides obtaining ransoms from ION, LockBit now possesses and possibly has continuing access to vital data which at any time they can attack or compromise. There can be little doubt that this represents intelligence valuable to the Russian government, particularly with respect to oil and gas contracts.

LockBit’s attack on futures markets has occurred at the same time that there is a NATO armaments build-up over Ukraine. Could it be that LockBit is providing Russia data access for a further cyber-attack on futures markets as an extension of the conflict in Ukraine?

This may be scare mongering. But good investigators always proceed on the basis there is no such thing as coincidence. Meanwhile, traders are likely to be discouraged from taking out long positions.

We are approaching the time when a new phase of the Ukraine war is about to kick off, with tank numbers building up. It’s not for nothing that Zelenskyy has been touring Europe with demands for yet more weaponry.

At this time last year, gold began a rapid rise to $2070 and oil traded up from $85 to $120 when Russia attacked. It is amazing that markets are ignoring the very clear signals that the conditions which led to commodity and energy prices soaring last February are in place to happen again. This time, will gold break out above its all-time highs? The chart below refers.

The chart suggests that the gold looks likely to find firm support at current levels for a successful assault on the $2070 level.

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