Submitted by SD Contributor Marshall Swing:
Gold COT Report 10/12/12
Commercials sold off -4,536 longs and covered a significant -6,818 shorts to end the week with 54.75% of all open interest, a huge decrease of about -1.57% from the previous week in total open interest, and now stand as a group at –26,698,800 ounces net short, a small decrease of 228,200 ounces net short from the previous week.
Large speculators literally broke the bank and continued their long buying pace well over last week’s net gains by grabbing 7,967 longs but also added 4,344 shorts for a net long position of 21,194,900 ounces, an increase in their net long position of 362,300 ounces net long over the prior week.
The small speculators once again contradicted the large specs and sold off an incredible -5,440 longs while buying into a very small 465 shorts for a net long position of 5,503,900 ounces a significant decrease of -590,500 ounces in their net long position from the prior week.
It would certainly appear that the large speculators were taken to the cleaners during this reporting period as their small spec counterparts effectively sold at or near the top. We only know this in hindsight, of course because the major portion of the price drop has been since this last Friday and the COT reporting period is from Tuesday to Tuesday and the results are not reported until each Friday afternoon.
The COT reporting period closed out last Tuesday at roughly a $1765 price so those new 7,967 large spec longs have been struggling to survive ever since as price at this moment is $1735. No one knows for sure how where these hedge funds in the managed money/large spec category set their stops but when you do the math a $30 drop in price accounts for losses of $30 million for those eager longs who believed that price was certainly headed above $1800 and easy profits were on the horizon.
Will price go lower from here?
The one major factor I see in this the large specs did add almost 5,400 short contracts the last two periods and the commercials usually do not want them cashing in on those but since the commercials have made so much selling longs and covering shorts they may decide to let them go. The commercials did take unbelievably large short positions during August and September so with price now at $1735 it may serve them well to drive price much lower and profit off of those short positions since they achieved their goal of attracting more speculative players into the game by letting price rise so much in the first place.
Looking at my historical charts, it seems typical that it is time for an assault on price considering the magnitude of the net short position taken, since the middle of August, by the commercials. Just as I wrote in my silver report this week, we see in gold that the speculators seem divided in their actions now and are easy prey for the commercials. A house divided cannot stand!
Also, the deciding factor in this bet, for me, is gold has dropped $63 off it’s $1798 recent high and the commercials are only 228,200 ounces net short off their high from the previous reporting period. That figures to be 0.8% reduction in their short position and the price drop achieved was over 3.5%. That is more than a 1 to 4 ratio.
Essentially, just like in the silver market, a massive price raid was achieved without a great expenditure or reduction of their net short position.
Always for your convenience, if you would like to contact the CFTC and express your views to them, I have provided you their phone numbers and I hope earnestly that you fill up their phone lines: http://www.cftc.gov/Contact/
firstname.lastname@example.org Chairman Gensler
email@example.com Commissioner Chilton
firstname.lastname@example.org Commissioner Sommers
Somalia@cftc.gov Commissioner O’Malia
email@example.com Commissioner Wetjen
firstname.lastname@example.org Director Meister
See you next week!