-->The problem for the gold shorts is that they have been playing a dangerous game for the last several expirys. They have been adding shorts prior to expiry and allowing the open interest to rise when it should be falling because they delta-hedged. On each individual expiry, the overhang of long interest near the current price was fairly high and they could shake it out due to the fact that the open interest rose significantly just prior to expiry. At this expiry, open interest hasn't risen much over levels of two or three weeks ago and the number of contracts with lot's of value in them is quite high due to the substantial runup in gold's price the last few weeks. The problem for the paper players is that this time the expiry created at least 25,000 contracts that are in the money by $50 or more and those won't be shaken out by a few dollar drop in price like the ones in the past. Moreover, the majority of the in the money options were for strikes below 370 so you really have to make gold tank in order to shake them out and that can't happen.

Well you might ask, how come they cant just add more shorts? The biggest reason is that there has to be some plausible source of gold to add a short even if it isn't in the COMEX warehouse. It has to be in a CB vault or in a mine in the ground. Now that Barrick has said no more hedging, they have admitted that there will be no more implied shorting of their inground supply. The CBs likely don't have the gold available to supply at a minutes notice and it is very likely that they supplied what was needed to keep the price below $400 back in September at the October expiry. Those factors set this expiry up for a huge physical squeeze which is what the GATA people were predicting for the first expiry where we went through some significant number like 340. Well the paper market this time, I believe is going to fail spectacularly because anyone that stands for delivery is just taking away the source of short gold that anyone attempting to go short now would use. Hence, if there are even a few hundred standing for delivery now it will probably boost the price of gold by $25/oz.

At this time, gold is over $400 on the spot and I think we get a $410 close today