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Alasdair Macleod: Gold selloff was book-squaring exercise for bullion banks

Section: Daily Dispatches

Market Report: Selloff Over?

By Alasdair Macleod
GoldMoney, St. Helier, Jersey, Channel Islands
Friday, December 4, 2020

The dramatic selloff in gold of the last few weeks ended on Monday morning when gold spiked down to an intraday low of $1,765 (silver $21.90). But in morning trading today in the European time zone gold was at $1,843, up $56 from last Friday's close, and silver at $24.28, up $1.65 on the same timescale.

The selloff in paper gold was a repetition of events in every November and December bar one since 2015, and the cause appeared to be the same. In the runup to the year end, the bullion banks manage prices in a book-squaring exercise, using the expiry of the December contract to squeeze out the bulls. The only exception was 2018, when they failed to push prices lower, but they still rose strongly into 2019.

... Dispatch continues below ...


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This time an estimated 150,000 gold call options expired worthless, representing 467 tonnes of gold. The premium income must have been substantial, a welcome offset for the bullion banks to their book losses on Comex positions.

The question now is: Will the pattern of a rally through December into the new year be repeated? ...

... For the remainder of the analysis:

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