silverCOTBy SD Contributor Marshall Swing:

Gold & Silver COT Report 12/28/12

Commercial longs rose a huge 3,955 on the week and covered an even larger 4,676 shorts to end the week with 48.07% of all open interest, an imperceptible decrease of -0.02% in their share since last week, and now stand as a group at 233,540,000 ounces net short, which is a massive decrease of over 43,000,000 net short ounces from the previous week!

Historically, with silver now at $30 and the commercial net short position at about 233 million ounces, the last time their net short position was similar was the closing of September 11 yet price was about $33.50  Couple that information with the massive long buying by the commercials and I feel safe to say the bottom is in for the short term

 

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Large speculators shed a monstrous 5,269 longs from their total while adding a tiny 77 short contracts decreasing their net long position to 152,215,000 ounces, a decrease in their net long position of almost 27 million ounces from the prior week.

 

Small speculators decreased 3,119 longs and picked up a miniscule 166 short contracts for a net long position of 80,325,000 ounces a decrease of almost 16.5 million ounces net long from the prior week.

 

Silver opened the COT reporting week at $31.69 and closed at $29.92 taking a tremendous hit the previous Thursday.  Since Tuesday’s close price has meandered around $30 in almost a straight line.

 

It’s not an absolute sure thing but pretty close that a bottom is in since the commercials piled on and bought about 4,000 longs in the aftermath of the massive raid.  Since virtually none of the speculators purchased short positions, we can assume they were unsure as to whether price would continue to drop after the Christmas break up to the New Year and were unwilling to take a chance.

 

Most of the letter writers are saying this was a typical commercial raid taking advantage of speculators being on vacation in an effort to lower price in volume scant trading sessions but I do not see it that way completely.  I think there was a fair amount of account position settling at the end year for tax reasons and that added greatly to the rush to judgment.  The charts show this same activity every year to some degree.

 

The most interesting number in this COT is the fact that despite massive changes in various open interest positions silver lost only 672 total open interest contracts.

 

Historically, with silver now at $30 and the commercial net short position at about 233 million ounces, the last time their net short position was similar was the closing of September 11 yet price was about $33.50  Couple that information with the massive long buying by the commercials and I feel safe to say the bottom is in for the short term.  However, we must remember that just because they have taken long positions heavily at $30 does not mean they will not sell them for little or no profit if they think they can gain short positions by enticing the speculators to buy long positions at these prices.  Sort of a switcheroo tactic that I have noticed they play from time to time.

 

In gold, however, the story is slightly different.  The large speculators bucked the trend and took at least 5,480 new short contracts.  Somehow they were able to anticipate decisively gold would drop further and had the fortitude to put their money on the line and were probably rewarded with handsome profits on their shorts covering those positions at the bottom.

 

Another figure to note is the small speculators who hold less than one third the long positions the large speculators hold outsold those large speculators by the 3 to 1 margin, 6,658 to 2,205.

 

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/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

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