Gold COT Report 8/24/12: Commercials Increase Net Shorts 2.73 Million Ounces!

Submitted by SD Contributor Marshall Swing:

GOLD COT REPORT 8/25/12

Commercials sold off a significant -9,515 longs and picked up a massive -17,767 shorts to end the week with 57.58% of all open interest, a significant increase of about 1.06% from the previous week in total open interest, and now stand as a group at 17,122,200 ounces net short, a huge increase of  2,728,200 ounces net short from the previous week

Large speculators bought up 9,345 longs while covering -7,035 shorts for a net long position of 13,068,400 ounces, a big increase in their net long position of 1,638,000 ounces from the prior week.

 

The small speculators absolutely gorged themselves on 9,795 longs while covering -1,107 shorts for a net long position of 4,053,800 ounces an increase of over 1,000,000 ounces in their net long position from the prior week.

 

I use the colorful terminology ‘gorged’ because the small speculators represent only 11% of the action in gold and the large speculators 27% but the smalls out bought the large specs in total purchases when it should have been the other way around by more than a two and a half to one margin.  Last week, small speculators had 78K contracts total.  This week they have just over 87K contracts showing an huge 11% increase.  It would seem the small speculators were more attune to what was happening in silver and decided to place major early bets gold would follow suit and it finally did which accounts for silver dramatically cutting the gold silver ratio.  They were right.

 

Unlike the silver commercial counterparts, the gold commercials had not purchased massive longs in the two weeks leading up to this price rise though they sold a significant amount of longs.  The amount of shorts they picked up is very close to the number of total longs purchased by the speculators so no apparent mysteries there.

 

One number that really sticks out like a sore thumb is the large speculators dumping -7,035 shorts.  Who would have thought they would even have that many at lower levels to have forced out of their hands by rising price tripping loose stops?  If we go back in the data a few months searching for an explanation, we see massive amounts of shorts being forced out of their hands in recent weeks but some still remained from the May 8 report when they had picked up 13,652 shorts.  Checking price on that date it closed at $1,605 and was the low of the reporting week so all those shorts were bought at or above that level.  They bought almost 7,100 shorts the following week but price went straight down to $1,526 within 10 days. The reality of what happened was those speculators who picked up all those shorts in the first week of May probably had long since sold at lower prices for profit so the shorts we saw shaken out in recent weeks were old ones and these latest shaken out were bought at much lower prices which indicates there were a very significant number of speculators betting gold price would continue to fall past $1,526.  Having all those stubborn shorts at a low price level may be a factor in why we never saw price fall below that bottom as the commercials took many weeks to shake out these shorts.

 

What a difference a month makes as it was as recently as the 7/24 report that swap dealers were net long in gold and now stand at 2.8 million ounces net short.

 

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/index.htm and email addresses as well:

 

ggensler@cftc.gov  Chairman Gensler

 

bchilton@cftc.gov  Commissioner Chilton

 

jsommers@cftc.gov  Commissioner Sommers

 

Somalia@cftc.gov  Commissioner O’Malia

 

mwetjen@cftc.gov  Commissioner Wetjen

 

dmeister@cftc.gov  Director Meister

 

See you next week!

 

Marshall

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