It is very obvious at this point that there is a serious problem on the COMEX.  43 tons were delivered in January, more than 4 times December’s amount which is normally a big month for Gold to be taken off the exchanges.  After a month like that it is clear that in order to keep the COMEX from running into failures to deliver longs have to be forced to pay up as much as possible to do so.  If there is an entity on the long side of the Gold market with deeper pockets than the exchange has physical metal to deliver then the exchange is trapped and will have to resort to force majeure.

Are we getting close to that point?  It is becoming more and more likely.  After this morning’s unemployment report which saw all inflation correlated assets rise Gold — and silver — were capped and forced lower.  there has been something wholly unnatural about this market.  Today’s action was predictable if you accept the thesis that Gold needs to be held in check for as long as it is possible.  There is no other credible explanation for the action in the gold pits right now.

The market is screaming out short-term inflation signals.  Gold should be rising along with them.  It is not.  It is being held down.  the fact that they could not engineer a deep sell-off from which to cover from only adds fuel to the rally when it begins in earnest.  Next week is a very strong bet on that but there are no guarantees.  Look for something out of place as the signal.  A greater than 2% move to the upside during COMEX hours would be one.