Market Report: Pre-weekend profit taking
Nov 12, 2021·Alasdair Macleod
Gold and silver continued their rally this week, following the shock US CPI announcement on 4 November, but in early morning trading in the UK time zone profit-taking appeared. From last Friday’s close gold was up a net $28 at $1846, and silver up 70 cents at $24.87. Comex volumes were healthy, and notably heavy on Wednesday.
Open interest on Comex has jumped significantly, particularly in the gold contract, which is our next chart.


Only some of this will be reflected in tonight’s COT report, because much of the rise in open interest was since last Tuesday. Last week’s market report described the evolving conditions as a bear squeeze on the bullion banks, and that is now happening in spades. To add to the establishment’s woes, the technical situation has turned round, with the gold price racing away above its moving averages, which in a few trading sessions are likely to form a golden cross under it. The current state of play is our next chart.

The inflation problem is best encapsulated in a long-term chart of the new US money M1 measure, which is next.

A dispassionate view of this narrow measure of money supply is that from 2020 it has undergone a hyperinflationary shock. While we can argue about the effect of covid lockdowns and the disruption to logistics and labour markets, as Milton Friedman opined, “Inflation is always and everywhere a monetary phenomenon…”
And now that the major economies are struggling to improve, the major central banks are likely to strongly resist market pressures to raise interest rates. For the bullion bank trading desks, these developments couldn’t come at a worse time.
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