Submitted by Marshall Swing:

Gold & Silver COT Report 12/9/12

In silver, commercials unloaded 4,115 longs on the week and 2,393 shorts to end the week with 47.74% of all open interest, an  increase of 0.69% in their share since last week, and now stand as a group at 292,570,000 ounces net short, which is an increase of just over 8,600,000 net short ounces from the previous week

 

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Large speculators decreased 880 longs and a massive 3,419 short contracts increasing their net long position to 206,360,000 ounces, an increase in their net long position of almost 12.7 million ounces from the prior week.

 

Small speculators decreased 1,324 longs and 507 short contracts for a net long position of 86,210,000 ounces a  decrease of over 4,000,000 ounces net long from the prior week.

 

A funny thing happened on the way to writing my report this week as I sometimes leave my computer up for many days at a time and Friday I went to my browser tabs with the CME open interest reports from the previous Friday and did a refresh to check and see if the new reports were out yet.  Much to my surprise the date of the report did not change but the numbers on the screen did change.  I scrolled to the bottom of the report and saw it had last been updated on December 5th.  Every week the reports are due to come out around 3:30pm Friday afternoon.  These reports are on the COT reporting week which runs from Tuesday afternoon’s pit close in New York to the following Tuesday afternoon close.  We have to wait another 3 full days in order to see the open interest numbers to get an idea of what directions open interest is taking by the major trading groups on the COMEX.

 

Imagine if you had to wait 3 full days to get change back from your cash purchase at Wal-Mart?

 

No, at Wal-Mart, the cashier scans the bar code, inputs the cash credit, and the register drawer pops open for the cashier to retrieve your change.  Instant gratification.  We would expect nothing less.

 

Or imagine, you go to the bank and deposit $1000 cash into your debit card then go home to make some online purchases only to find out the cash deposit has not been credited to your debit card and there is a 3 day hold on the cash to inspect it for counterfeiting!  We understand a check deposit goes through several day’s hold because that check has to go to another institution for approval before clearing with both parties.

 

In this age of computer transactions, we have all come to expect instant gratification and rightfully so.

 

Well, the reality of futures trading is that it is just like a cash transaction.  At the point of sale, the parties know how much they lost or how much they made.  They do not have to wait hours or days to know the results of their trade.  It does take some time to settle up into the parties bank accounts but the reality of the trade is known instantaneously to both the long party and the short party.

 

So, why in the world can the CME not get the final numbers right a full 3 days later on Friday afternoon?

 

I will tell you this.  If a real world business took that long to get the final data, in this day and age, they would be out of business.  Our grocery stores are stocked with about 3 days or so of food and inventories are constantly checked so timely orders can be made to replenish the shelves.  Is the CME still operating with software and hardware systems and technology 20 plus years old?  Or are they just lax in enforcing the reporting requirements?

 

I have been reading these reports for a long time and if I had not inadvertently seen those numbers change on the report refresh I would have never known that the numbers posted on Friday afternoon might not be the final numbers.

 

A couple of these discrepancies were into the thousands of contracts.  And the report was updated 5 days after the final numbers are supposed to be posted.  How often does this happen?

 

I only input the totals on the open interest into my database and the amount of change and all the percentages are automatically calculated.  I usually spot check a couple of the change numbers with the report to make sure they agree but if I had to input all the change data as well I would retire from report writing!

 

I will tell you this, on my report on gold it shows the commercial short position change as -39,514 contracts covered.  On the CME report it shows -46,346 contracts covered.  That means there was an almost 7,000 contract discrepancy in the data reported last Friday.

 

Hopefully this is just some one time error on the part of a trader’s data feeds and I will never see this happen again.  But since this reporting error is from the commercials it brings up the question of is the open interest positions reported by the commercials accurate or just what they say it is?  I will also tell you total open interest was correctly reported and it was the internal numbers that were inaccurate.  My process automatically adds up all the longs and shorts to make sure they are equal and it was last Friday.

 

Imagine how all those traders who make contract or option trading decisions based on the COT reports feel about now?

 

In silver…

 

The commercials net short position now stands at over 292 million ounces so we should definitely see a decline in price in the near future as total open interest positions have decreased but their net short position increased and this number is about as high as it gets based on current total open interest.

 

The real surprise is that we have not seen a short term greater reduction in large speculator long open interest considering a more than $1 drop in the price of silver.  The small specs unloaded a healthy number of longs but it appears the large specs got caught flat footed once again.

 

Another data point that backs up a drop in silver is the swap dealers picked up almost 18 million net short ounces this past period with over 3,000 new contracts total.  That is a mammoth position change considering they are about the same overall size as the small speculators and represent only 30% of commercial traders.

 

In gold…

 

Here we see big reductions in long open interest all across the board, as expected.  The real battle has been in gold the last couple of weeks and the silver open interest has just been a follower but that will not last too long.

 

In both metals we see tremendous reductions in total open interest, about 9,000 contracts in silver and 45,000 in gold.

 

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

  1. Let the cartel do their thing which is to smash gold and silver’s prices and by that, it will allow us to buy more precious metals very fast, easily and cheaply. Although, the cartel won’t be able to manipulate gold and silver’s prices forever because the supply and demand of the physicals will take over the market soon. 

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