Another Short Squeeze in the Precious Metals

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“Conditions are ripe for another short squeeze”

On August 16, 1999, I recounted how legendary traders Jim Fisk and Jay Gould had profited handsomely from a massive short squeeze in gold 130 years earlier. The opportunity they took advantage of arose because of the ongoing monetary turmoil of their day arising from the so-called “greenback,” the irredeemable fiat currency issued by the North to finance President Lincoln’s war with the South.

Gold was $260.90 that day, and nine days later reached its $253 low. From there, gold never looked back because the short squeeze I had expected began.

In the next six weeks gold jumped nearly 30% as a massive squeeze gained momentum pushing shorts to the edge, prompting central bank intervention and the announcement of their bombastic “Washington Agreement on Gold,” which was purposefully and maliciously designed to make it appear they were not going to disrupt the gold market.

Conditions are ripe for another short squeeze, which was a key element of my forecast for this year. Several big banks and others owe physical metal, but there is not sufficient metal available at current prices for them to purchase to enable them to cover their short positions, which is the important point. Physical metal cannot be conjured up out of thin air like dollars, euros, pounds and the world’s other fiat currencies that are merely intangible bookkeeping concepts. When a bullion bank owes physical metal, it must repay real (i.e., tangible) physical metal or default.

There is a huge naked short position out there. Much metal is owed, but not enough metal can be bought at the current price to enable the shorts to repay their gold debts. In fact, a squeeze has already begun. It began last summer when Greenlight, a large US hedge fund switched out of GLD into physical metal, and I expect the squeeze to continue. A price surge in gold and silver will be the inevitable result.

Soon central banks will once again be looking “into the abyss.” We can therefore expect more interventions from them that may buy them more time, but they are losing the war against honest money.

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