I guess this explains a lot of what happened Monday and this week. Long fund liquidation due to an increase in margins. This makes the existing longs even stronger.

From JSMineset:

Jim Sinclair’s Commentary

The ideas that a spread financed at $10,000,000 can control the total production of gold from South Africa shows you the madness of credit, debt and markets now.

Huge U.S. gold position liquidated by fund-WSJ
LONDON | Fri Jan 28, 2011 5:44am EST

LONDON Jan 28 (Reuters) – Hedge fund SHK Asset Management liquidated a U.S. gold futures position this week valued at over $850 million, more than 10 percent of the main U.S. futures market, the Wall Street Journal reported on Friday.

As a result of the move, which was made on Monday, the number of gold contracts on CME Group Inc.’s Comex division plunged by more than 81,000, to about 500,000, in their biggest single fall ever, the WSJ reported. It said an average daily move is about 3,000 to 5,000 contracts.

Daniel Shak, who runs the $10 million fund, told the newspaper that the trade had been profitable for him for years, but it stopped working and the exchange kept raising his margin requirements, forcing him to put up more money.

Shak said that when the exchange raised it by 25 percent on Monday, he decided to cut his losses and end the trade, the newspaper said.