Submitted by Marshall Swing:
Gold & Silver COT Report 12/21/12
Commercial longs rose 832 while shedding 1,752 shorts to end the week with 48.09% of all open interest, an imperceptible decrease of -0.10% in their share since last week, and now stand as a group at 276,695,000 ounces net short, which is a decrease of just under 13,000,000 net short ounces from the previous week.
Large speculators shed a whopping 3,659 longs from their total and covered a smallish 148 short contracts decreasing their net long position to 179,945,000 ounces, a decrease in their net long position of over 17.5 million ounces from the prior week.
Small speculators added 21 longs and covered 906 short contracts for a net long position of 96,750,000 ounces an increase of 4,635,000 ounces net long from the prior week.
For the reporting period, silver started at $33.06 and closed at $31.69 for almost a $1.50 decrease in price.
There are some surprises in the numbers as the commercials show an additional 832 longs purchased in a down week. If we look at the disaggregated numbers, the long buys are almost evenly split between the producer merchant and the swap dealers at 464 and 403 contracts added, respectively. These additional longs were probably added early in the COT week on Wednesday in an attempt to get the speculators to purchase even more longs but this did not work out for them and are holding a significant losing position even more dramatic since price has dropped another $1.70 since Tuesday’s close. Remember, the COT reporting week is from Tuesday to Tuesday.
Equally interesting is we do not see a concerted effort by the speculators to charge in to buy shorts to capitalize on the price free fall. That is also unusual. Nobody is taking risks here at the end of the year.
I suspect there is a lot of selling for tax reasons going on here as that happens every late December. There may also be a lot of selling going on in anticipating of going over the fiscal cliff and all markets taking a tremendous hit in the rush to judgment. Interesting that no one seems to be writing articles on these possibilities. There has been so many articles written in recent weeks on gold and silver blasting off to the moon and beyond that gravitational boundary that to write anything else is almost anathema and a writer would be ridiculed at the suggestion a double is not in the cards.
A double is not in the cards in the immediate future.
While we see the commercial net short position decreased almost 18 million ounces this past period, the commercials are still at almost 277 million net short ounces and that is still historically quite high.
Another interesting data point is that when price was on the way up last August 23rd at this same $30 price we have after yesterday’s close, the commercial net short position stood at around 162,000,000 ounces. Their net short position as of Tuesday’s close was 276 million ounces so if we take off the same number of net short ounces as last week then they might be at 260 million net short ounces when the COT report comes out net Friday so we can see there is a lot of room to raid price if they so choose.
There is one more week left before the tax season closes and it could be a volatile week because those remaining speculators that need to close out positions for tax reasons are stuck either selling now or waiting a few more days to see if they can get a better price on rebound. Either way, most of their hoped for, short term profits on longs bought on the way up since early August, are gone.
Here we see the speculators engaging in taking significant short positions and as we now know they have been rewarded since price declined to $1658 since Tuesday’s close at $1672 with a low of $1636. Most of those short positions were probably taken around $1700 so they are significantly in the money and their may have been a rash of profit taking at the $1670 level and again at the $1650 level.
If most of those speculator short positions were covered after the COT period on Wednesday and Thursday, then there is little resistance for a continued drop in price next week.
The most interesting data point in gold is the large speculators adding 686 longs. We would have thought to see a significant sell off but they hung on defiantly.
Overall, to see a rally in gold or silver before the end of the year is not likely. It is a great time to be buying physical.
As always, for your convenience, if you would like to contact the CFTC and express your views on the commercial trader’s unfair dominant short position, I have provided you their phone numbers and I hope earnestly that you fill up their phone lines: http://www.cftc.gov/Contact/
email@example.com Chairman Gensler
firstname.lastname@example.org Commissioner Chilton
email@example.com Commissioner Sommers
Somalia@cftc.gov Commissioner O’Malia
firstname.lastname@example.org Commissioner Wetjen
email@example.com Director Meister