With gold hitting new all-time highs and silver climbing back towards the mid $40s, a trader out of London told King World News today, “The action is very positive. If there is a pit (Comex) close above $1,680, gold will race to $1,705 because of all of the buy stops above $1,680. There are a tremendous number of shorts in the gold market and a significant number of them will capitulate and close out their shorts above that level.”

London Trader continues:

“The same guys who are shorting gold have been shorting silver and if we get the covering in gold above $1,680, silver should move $2.50 higher on short covering as well, which at that time should be roughly the $45 level.

The physical buyers in gold have not been chasing the market at this point, they have been waiting for their usual summer gift, and it hasn’t come. Usually they are filled by now, so we are going to see those guys come in shortly, possibly after non-farm payrolls. They (the physical buyers) have moved their levels way up now and they are going to start chasing price at some point. Remember, $1,680 is the key here.

Don’t forget we are moving into season and right now no one is at their desks. It’s all the juniors running the desks now, I mean everyone is on holiday, virtually everyone is on holiday.

Silver is basically just eyeing gold and if gold closes above $1,680 we will also see some capitulation on the part of the shorts in silver as well, which will cause a huge pop because there will be an air pocket these guys are trying to cover into. Just remember their are a tremendous number of shorts that will capitulate above that level, which will cause a spike, a very quick spike in the price of gold and silver.”