COMEX BATTLE: Tomorrow the Bullion Banks. They will try to crush Gold and Silver

[Igor Pereira]

Tomorrow is the day when the physical reality of the market collides with the financial interests of paper giants.

Third Friday of the month, the day of the monthly maturity of options (OpEx). But this OpEx is different. It occurs in a macroeconomic certainty vacuum, soon after a chaotic and backward employment report (NFP) that shouted "stagflation" and left the interest market (swaps) completely confused about December.

By Igor Pereira, Financial Market Analyst, Junior Member WallStreet NYSE

Make no mistake: tomorrow's volatility in Comex will not be organic. It will be a calculated attempt of the great bullion banks (who act as the main sellers of options) to defend their balance sheets.

Why will volatility be greater than normal?

1. The Battle of Strikes: The large banks and market-forming (Market Makers) that have sold tons of calls and sales (puts) options have a huge financial incentive to move the price of the underlying asset (whether SPX, QQQ, or Gold/Silver) to a level where most of these options expire without value ("out of the money"). This generates artificial and violent price movements at the end of the day, known as pinning.

2. Dynamic Hedging (Gamma): With the uncertain market on the EDF, dealers are constantly adjusting their hedges. Sudden movements in one direction force us to buy or sell more to protect ourselves, exacerbating the movement (the famous "gamma squeeze").

3. The Weekend Factor: No one wants to be overly exposed to risks of geopolitical or economic headlines during the weekend, especially in this environment. We'll see a lot of short-term settlement in the late afternoon.

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1. The Motivation of Banks: Max Pain Theory

Banks that sell purchase options (calls) to speculators are essentially "short" (sold) in volatility and price. If Gold (GC) and Silver (SI) close the week above certain key exercise price levels, these banks lose billions.

Their Objective Tomorrow: Use your firepower in the future market (selling paper contracts aggressively at times of low liquidity) to push the price spot down, ideally for the point of "Max Pain" – the price where the highest number of options (both calls and puts) expires without value.

2. OpEx Friday's Playbook at COMEX

Get ready for the following script tomorrow:

• Morning Slam: Often, we see a massive sale of future contracts right at the opening of New York or at dawn (London time), trying to break levels of technical support and trigger stop runs (a cascade of automatic stop-loss orders) of leveraged retail traders.

• Reality Disconnection: We will see the price of paper fall even if the headlines are positive for gold (such as the stagflation we discussed). The goal is psychological: to make you doubt your long-term thesis.

• Closing Volatility: As the "fix" schedule approaches at the end of the afternoon, the battle for the last cents around the exercise prices will be intense.

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3. Trap and Opportunity

The trap is to sell your physical metal or your long-term positions based on handling the paper price of a Friday.

The Structural Reality (Our Thesis): The banks are playing a dangerous game. Every time they drop the paper price artificially in COMEX, they create a opportunity for massive arbitration for China, India and Central Banks who are desperate to exchange their dollars for real physical metal at discount prices.

• They win the paper battle on Friday.

• They lose the physical war on Monday when delivery orders increase in Asia.

Tactical Conclusion for ExpertFX School Members

At COMEX tomorrow, especially after the London session (05hs, Brasilia GMT -3)

1. No Alavanque: If you operate futures, reduce leverage. The whipsaws will be designed to get you out of the game.

2. Ignore Noise:Movements like $30 gold or silver $100 without any fundamental news, know it's OpEx. It does not characterize a trend change in the medium/long.

3. Accumulation opportunity: For the medium- to long-term investor, OpEx Friday slams are historically excellent entry points. The banks are giving you a grant.

Keep it cool. Tomorrow's comex game is dirty, but predictable for those who understand the rules.