Gold & Silver COT Report 2/15: Commercials Cover 27 Million Ounces of Silver Shorts!

gold COTBy SD Contributor Marshall Swing:

Gold & Silver COT Report 2/15/13:

Commercial gorged on 5,889 additional long contracts to their total on the week and a net modest 740 new shorts to end the week with 49.46% of all open interest, an huge increase of 1.76% in their share since last week, and now stand as a group at 233,985,000 ounces net short, which is a decrease of 25,745,000 net short ounces from the previous week

 

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Large speculators sold off a huge 2,244 longs and grabbed up 1,545 short contracts decreasing their net long position to 160,360,000 ounces, a decrease in their net long position of almost 19 million ounces from the prior week.

 

Small speculators sold off a net 363 longs from their total and added 997 short contracts for a net long position of 73,625,000 ounces a decrease of almost 7 million ounces net long from the prior week.

 

If there is any way to describe a takeover it is with the percent of total open interest category as commercials increased their share by 1.76%  I cannot do enough to describe how huge a move that is for a single week.

 

The way in which they did it boggles the mind a bit.

 

Silver price started the COT week at $31.79 and closed at about $31.11 seeing a low of $30.58 in between on this Tuesday AM.  That is only a difference in price of .68 cents while the commercials as a whole engaged in massive long buying and there was significant short covering on the part of the swap dealers.  To see long buying on this scale during a price drop is rare as likewise we recently saw a price drop while they were increasing short positions, also rare.

 

An important point is while the commercials as a whole decreased net short positions by over 25 million ounces the producer merchant only reduced their net short position by just over 5 million ounces so they have plenty of dry powder left and we may have seen them exercise those positions during the remainder of the week as price tumbled from COT close on Tuesday by more than $1 to the week’s close on Friday.

 

Those speculators who picked up significant short positions during the COT week saw no effort to dislodge those positions on the way down to $29.80 on Friday’s close.  That is very unusual.

 

Total open interest increased by 1,305 contracts during a significant price drop so the market psychology is definitely negative and all players are pessimistic about the silver market.

 

Where is price going from here?  It is very hard to say because of the commercial’s heavy long buying in both gold and silver.  This long buying could be just to entice speculators to buy longs, as I have written in the past but keep in mind the COT week is from Tuesday to Tuesday so that strategy did not work from Tuesday afternoon through Friday close.  Commercials added a lot of shorts in the last few weeks and we may have seen an unwinding of those in the last 3 days.  My guess is we are at a bottom for the better part of the next week with commercials hoping for speculator long buying this coming week.

 

In gold, the open interest movements were very similar.

 

From the beginning of the COT week to this past Friday’s close, gold moved from about $1673 to $1610, a 3.8% reduction and silver from $31.79 to $29.80, a 6.26% move to the downside.  Silver was clearly the main target.

 

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Comments

  1. I can toss a dart and guess prices as close as the charts…

  2. Charts mean shit in this enviroment.I wish all these TA chartists would just hang it up until the manipulation capitulates sometime in the next ten years or so whenever the shtf commences.
    Pinning the tail on the donkey is probably just as accurate.

  3. TA charts are not very useful for PMs. But the COTs are very significant. The simple reason is that essentially the PM paper market is about two opposing Forces – the Commercials versus the large Speculators, and following the Commercials usually means being on the winning side.
     
    The week to week COT changes in the positions of the two Forces is not as predictive as watching the approximately 2 – 3 months changes, and watching the changes in a bar graph format rather than numbers in Excel format (Marshall if youre reading this please consider the bar graphs as an addition to your excellent weekly reports). The bar graphs clearly show Commercilas and Specs going in opposite directions, with the gold/silver price on an aligned price graph so one can see how the patterns work, and which are very predictive.
     
    In the simplest terms:
    - when Commercial short interest is low, and Spec long interest is low, prices are likely to rise (the position in early August 2012).
    - when Commercial short interest is high, and Spec long interest is high, prices are likely to decline (the position at end November 2012).
     
    Next weeks COT report is likely going to show Commercila gold short interest back down to August 2012 levels, and Spec gold longs down to August 2012 levels, which is bullish for gold.
    However its not the same for silver, and Commercial shorts and Spec longs are both still high (bearish for silver). The Commercials are battling to bring down the Spec longs in silver, and not getting it right. The Commercials may fight on, or may capitulate and take their losses, or huge physical for delivery could bring down the Commercials and cause a dangerous and destabilizing “Comex default and failure” in silver. The Commercias have painted themselves into a corner in silver, with potentially massive losses, and could do something entirely unpredictable to escape their mess. JPM just suffered the embarrasment of the London whale derivitive scandal, and, as JPM would be the biggest loser in a silver capitulation, the silver market appears very dangerous right now.

    • Andyz – that’s really good information.   Is there a service or website you use which shows these COT reports charts or data over a period of time such as 5 years?  Or is there some place which has all this data stored that could be entered into an excel sheet and plotted?
      I agree the silver market appears volatile which usually indicates a huge correction is imminent. We all believe that correction is a vertical line straight up but no question it’s getting kicked all over the place.  In the past 4 years it’s moved literally from $8 to $48 and about every place in between.  

  4. as a Ebay Top rated power seller ,buying selling Silver coins.bullion world silver  coins, I didn’y Notice is change in price..yet!
    ASE are still about $37-39.00 ,ASE Proofs $75-100 and 90% silver bags $32-35

  5. I still do not understand how the banksters cover shorts by selling shorts.

  6. @PowerBall
     
    i did not mention that the COT graphs I use are the NET positions of the 2 Forces. Commercials hold both long and short positions (as do Large and Small Specs), so its their net position thats important. I subscribe to Sharelynx (http://www.sharelynx.com/index2.php) which gives the graphs perfectly for 9 years and more. I’ve searched for a free source but no luck – at any event Sharelynx has got a wealth of other useful data/graphs. Its laborious, but you could construct your own by deducting shorts from longs for the weekly COTs (Specs will give you a net long position, while Commercials will be a net short position. I’ve tried before to post a screen shot of a typical graph but could not get it right – probably copyright issues. Interestingly in August last year silvers Spec position fell below 11 000 net long, with Commercials about 10 000 net short, something thats only happened 10 times in the last 13 years (as I recall), and each time prices rose sharply thereafter. By contrast Specs net long is now about 32 000 and Commercials net short about 80 000. however the Commercials are having a tough time trying to reduce Spec longs (ie depress silver price), so its a bit of a tricky call right now, whereas a situation like early August last year is about a dead certainty.
     
    @rocketRedGlare
     
    The Banksters give a short burst of short sales to fool the Specs and Momentum Traders into following them. They do follow, but with much greater volumes than the Banksters used to trigger the cascade. The Banksters then proceed to buy from the Specs and MTs as they pile in selling the price downwards. In this secretive manner, the Banksters trick the Specs and Momentums to sell, and thus cover their shorts/take profits on their shorts. Once the price is low enough, and downward momentum is exhausted, the Banksters then use a burst of long buys, chasing the price up, triggering the Specs/M’s short stops and “harvesting ” them in the process. In the trade its called a wash and rinse cycle, where the Commercials regularly fleece the Specs and Momentums, and of course us small players who tend to act like the Specs. Playing on the side of the Commercials is a safer strategy, but needs nerves of steel control of emotions.
     
     

  7. @ PowerBall – my apologies – where I said Commercial net shorts position today is about 80 000, its  around 50 000 – transcription error. The latest COT is based on the COT at end last Tuesday. After Tuesday and the price fall into Friday, both Spec longs and Commercial shorts should have reduced further, but we wont know until this Friday, when COTs are released for up to end Tuesday tomorrow.

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