Banks Cover Gold & Silver Shorts In Midst Of Rally (Uncut) 02-27-2025

Banks Cover Gold & Silver Shorts In Midst Of Rally

For the last two weeks to a month, the gold market has seen a rather strong resilient rally, coupled with a drop in open interest. This signals that funds have been selling to take profits, while a more earnest short-covering cohort has been driving the price upward. It suggests, in fact, it says, if you look at the CFTC report closely enough, that bank dealers are covering shorts into a rally.

The question going forward is, will that continue? Welcome to the Morning Markets and Metals with Vince Lancey, where each morning Vince brings you the financial and precious metals news to get you ready for your day. And now, here’s Vince. Good morning, I’m Vince Lancey.

This is the Goldfix Market Rundown. Today, adjusting my screen, there we go, we will be discussing how gold funds have been taking profits for about the last month, and banks have been absorbing losses during that same time period. An aberration for older gold bugs, I’m sure, but we’re going to lay it out for you.

That’s exactly what’s been happening for the last month, with a focus on the last three days as well. Let’s start with the markets. Ten-year yields are 429, up three basis points.

That’s a bounce after yesterday’s hit, which was bullish for bonds. The dollar is 106.62, up 15. The S&P 500 is 5994, up 18.

Remember, NVIDIA earnings came out yesterday. We’ll touch on those in a second. The VIX is 1781, down one change.

Gold is 2885, again on the lows of the morning, starting at four or five in the morning, and boom. Silver, 3187, up one cent. We are seeing an unwind of the long gold-short silver trade by macro-discretionary funds.

There it is. That’s how it happens. Love to see it.

Silver is manipulated lower. There is no doubt about it, but there’s also natural suppression from funds who put trades on. Copper, 457, up five cents, really doing well in light of tariff risk.

Although I’m not sure how that manifests, I’m reading up on it and I’ll get back to you. WTI, up 62 at 69.70. Natural gas, four even, down seven. Bitcoin, 86 and change, up 2,000, but a lot lower.

Palladium, 925, down a buck and change. Platinum, 964, down two and change, seeming to be stabilizing at whatever this post-war talk has done to it. Gold, silver lower on a day where gold is down 30 bucks so far.

Significant, I believe. Grains are mixed. Wheat is down six.

Soy is up eight. And corn really doesn’t care too much. Unchanged bid, 573 for wheat, 1035 for soy, and corn is 479 and change.

Okay, there’s the homepage. Bullion Bank Trader breaks down the last two days and we’re going to break down the last month using the last two days as the potential final, well hopefully it’s the last three days now, final nail in the coffin and we’ll explain that without giving too much away. Please subscribe for premium access.

Stagflation concerns rise. There were two videos out yesterday that we thought were notable. One that we put on the site, Michael Oliver and Alastair McLeod, really nice conversation, a technician, a fundamental analyst talking about silver and gold and talking about them from the perspective of the changing environment.

Michael Oliver had a phrase he used there, it’s like chapter three of Atlas Shrugged, you know, chaos and chaos, whatever the other word they used was. It’s been a long time since I read that book. But interesting.

And Alastair McLeod, knowing the markets in general, right, but also steeped in history from a uniquely UK perspective, he goes through changes in currency and it’s just really, I think, a wonderful little conversation that they have. There’s another conversation we’ll touch on in a second, another video I should say. All right, let’s start.

Funds take profits as banks absorb losses. Now, as a quick entree, you have seen over the years, if you’re a reader of gold posts, YouTube stuff, that every time the banks cover shorts, when the market drops, the headline is banks cover shorts. And then the sub-headline is market drops.

Those two statements together mean funds are losing money and banks are making money. The market’s getting cheaper and they get to buy back their shorts cheap. Here’s an example, rare, but it happens, but very pronounced of the banks covering shorts with the market higher.

Very bad. If bank trading desks for bullion were the only public aspect of a company right now, you would short the bullion banks right now. Now, of course, they have much bigger operations besides their bullion operations, but if they were to break out their bullion desks as a profit center, they’re not making money from their trading.

Maybe they’re making money from other things, but not from trading. Okay, so let’s get to the meat of it. Funds are unwinding positions from a position of strength, taking profits while banks step in as buyers.

They don’t step in because they want to, they step in because they have to now. The same banks that absorbed losses over the last two weeks are now locking in those losses by buying back. Macro funds have started to take profits.

ETFs and CTA flows have been steady buyers for weeks, but bullion banks are covering more aggressively than in past cycles, buying rallies instead of fading them. China and central bank demand remains concentrated in the 2870 to 2900 range last we checked. This setup is familiar, it played out similarly before the election.

At that time, macro funds were more patient, selling rallies, just like they are now with the last two days notwithstanding. ETF showed greater resilience buying it because of the event, the election, and China participated much more discreetly. Despite some structural differences, the broader trend remains intact.

No signs of flow deterioration. The dynamic resembles a more volatile cap-and-trade scenario with funds taking profits, now acting as the cap, rather than the BIS, or I should say in addition to the BIS, but we can’t prove me right on that. We can’t prove me wrong either.

The key takeaway before I go into this chart here is macro funds are taking profits, number one. Bullion banks are booking losses and potentially repositioning before a event. Capitulation may be near.

These last three days, smell of capitulation, meaning the funds are getting done selling. The question is, are the banks done buying? Because it’s the banks buying that drove the market higher, not the funds selling. So as long as tariffs, our feeling is, as long as tariffs and uncertainty remain, we expect China buying to continue to raise the floor under prices.

This is what selling capitulation looks like. Now, quickly giving you an idea what that chart looks like. This is from Randall Blava, and as any time you use someone else’s work, it’s very nice to cite them.

In fact, it’s probably plagiarism if you don’t, but that’s neither here nor there. Randall, thank you. He’s a founder, and his charts have become, we voice ideas, he makes up very good charts of them, and then we have some tools to work with.

So what you’re looking at there is the gold line is the price of gold, and the red line, we don’t care about the little blue line there, right? The red line is the open interest of the market. Now, there are all kinds of things you can take away from this, right? But the thing we’re focusing on here is the blue are the blue arrows, right? The open interest is dropping, the red line is dropping over this time period, and the market is rallying. That says people have come to buy, not people are coming to sell.

Normally, open interest drops, and that’s when the fund’s puking. Oh, my goodness, it’s going down, let’s get out. Well, this is banks going, oh, my goodness, it’s going up, let’s get out.

And that’s what’s been happening. And there are drivers, why, why, why? Well, tariffs, geopolitical uncertainty, and this incessant pronounced repatriation has got someone spooked. That’s the secular move.

Now, the little square there, that’s the potential capitulation. We’ll talk about that in a little bit. But this is a picture of funds saying, this is a good level to take profits.

I’ll sell some here, here, here, here, and here. And this is the banks going, we’ll buy it there, there, there, and there. So they’re chasing.

And are they losing money? Yes, they’re definitely losing money. Are they losing money last week? Well, they’re locking in losses from 2024, 24, late 23, because you don’t have to mark your books to market when you’re a bank. But when you close it, you can’t really hope that it comes back anymore.

It’s like denial. Anyway, the question as a bull, you ask yourself is, are they buying because they’re, they’re losing money? Yes. Are they buying because they’re going out of business? No, no, it’s ridiculous.

Like they’re, they’re too big for that. Are they buying because they see something happening that they may want to reload their guns so they can sell it higher? And that is usually the answer. I haven’t seen it this pronounced in a long time, especially with no big bullish event on the horizon like the election or the BRICS, but they will frequently buy to sell later.

And why? Well, sometimes they get a tap on the shoulder. Hey, as a bank, we’re a little bit concerned about the Gaza war starting. It happened then.

We’re a little bit worried about this Chinese buying. It started, it happened then. So in October, it happened where they bought before rally, right? In February, between December 23 and February 24, they slowly bought before the rally started.

And midway through that rally in March, I remember very, very clearly there was a week period where they just bought the crap out of it. And then it just kept going higher. So the question is, bringing it back to the present day, are they buying because they got tapped on the shoulder metaphorically or literally, or are they buying because they’re just, they’re done playing this game? That’s the question, right? Okay.

So we’ll discuss this a little bit more in premium on the whole capitulation concept. News and analysis. Bullion Bank trader breaks down the last few days, what I just said in much more detail as relayed from a Bullion Bank trading desk.

Michael Oliver and Alistair McLeod, I touched on that. Arcadia Economics examines prior Fort Knox audits. I can’t say his name, Jan.

I say Jan all the time, but I kid. I don’t even know how to say his name. Jan, Jan.

I was interviewed by Chris Marcus and Jan has a keen interest in the historical perspective. And the interview was very good from what I saw of it. And Jan did some research and he showed the historical parallels.

Anyway, next watch. Trump announced a sale of gold cards. That’s a little bit of a joke.

Stagflation concerns rise. Next. All right.

Market news revolutionary. Okay. I got to change that title, but Nvidia earnings came out.

Q4 revenue topped estimates. The data center revenue surged. That’s the hyperscaling concept.

Driven by AI chip demand, though the rate of expansion is slowing. So that can be viewed as bearish. You look at the stock market, it’s up, but not as much as it usually is when AI beats earnings.

And while Q1 sales guidance was above expectations, gross margins are seen as easing in Q1, leading to shares slipping about 1.5% by the end of the extended trading session with investors left slightly underwhelmed. All this is according to Bloomberg. There are other stories.

We wanted to go into them, but we’re just going to leave them here for you, right? The Epstein files. Is that market-based? No, it’s not. But the coverage by zero hedge is actually very good on it.

Bezos rebrands. That’s our phrase. Bezos goes from liberal to conservative overnight.

Is that market relevant? Actually, it is. Okay. And we believe that events like this reveal the fragility in markets, reveal how things can reverse.

Now, less esoterically and more and more concretely, there will be a moment when this crushed confidence in government bleeds into stocks as one half the nation has a crisis of confidence driving them down while metals are driven upward even. Now, that’s my little statement there. What am I describing? I’m describing when Nixon resigned.

There was a crisis of confidence, stocks got crushed, metals rallied, and half of the nation was demoralized. Now, I think whatever is going on in the government, you want to look at the terrorism, you want to look at the pedophilia, you want to look at the prejudicial policies of bureaucratic statecraft. Whatever it is, whatever of the thousand cuts that have done to our ability to remain as free, sovereign individuals, well, those are being revealed.

And while we feel vindicated, told you, right? That’s me. Told you, right? The other side is going, oh, shit. They’re getting nervous.

And that’s what happened to the Republicans in 75 and 76. So keep that in mind. If we do have a big turn, it could be a lefty boomer going, you know what? This is too much.

I want to get out. That’s what happened in 76 for the Republican side. Data on debt, GDP, and PCE.

GDP is going to be coming out in a minute or two. I don’t have a feel for GDP today, but I think it’s all about revisions now, right? PCE is tomorrow, 2.4%, 2.6%. Quick check back to the markets, and then I want to move into capitulation. I’ll leave this on the screen.

So a summary of, I think, this broadcast would be, for the last two weeks to a month, the gold market has seen a rather strong, resilient rally, coupled with a drop in open interest. This signals that funds have been selling to take profits, while a more earnest, short-covering cohort has been driving the price upward. It suggests, in fact, it says, if you look at the CFTC report closely enough, that bank dealers are covering shorts into a rally.

The question going forward is, will that continue? The answer is, I believe the fund selling is almost done, based on the last three days’ behavior. Is the bank buying done? We don’t know, but we are in a capitulation of sorts. So that’s it.

The charts themselves. Now, I’ve been working with Sumo’s Poly, and I’m getting a handle on it now. I had an alert.

It was triggered this morning. I had an alert here, going back to this top, and a little bit above this top, I went with, what did I go with? I went with this bottom, because it was kind of bifurcating all these levels here. And that was my level to either buy the dip or get bearish and sell.

So I’m watching this area closely, and there is a line there. So I would say, combining the things you see on your screen there with my methodology, this is the trading range, okay? From here to here. Below this, consider being very bearish until it goes back above it.

You know, if there’s a long wick on a daily chart. And above here, you should not be short. And above here, you should be long.

That’s it. So we’re at the very bottom of a trading range. This is the liquidation.

Funds are selling, banks are buying. Funds are selling, banks are buying. Funds are selling, banks are buying.

And the bottom of the line for the last three days are now selling at the highs and selling more just to get out. They’re taking profits, you know? They’re taking profits from 2400, you know? And the banks are covering, but the banks are getting a little bit more patient and letting it come to them for these last three days. So the question is, are the banks getting patient because they know it’s going down? Probably not.

Are the funds getting impatient because they’re near the end of their selling? Probably yes. So that’s why this whole structure here, if you’re like a white golf person, this looks like a distribution, and it could be. As long as we stay above this area here, on the short term, you’re bullish.

If we go below this area, well, then you’re into seasonality. Then it’s like nobody’s going to buy gold until September. And so between now and September, it becomes a little bit of a crapshoot.

Okay? And that’s it. I’m Vince. Have a great day.

Well, thanks for watching this morning’s Markets and Metals with Vince Lancey. We sure appreciate you tuning in and starting your day with us here. Hope you enjoyed the show.

We’ll see you again tomorrow. Please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions.

And thanks for watching.