goldCOTBy SD Contributor Marshall Swing:

Gold & Silver COT Report 2/24/13:

Commercials added 2,026 additional long contracts to their total on the week after tremendous gains last week and covered a huge 6,815 shorts to end the week with 47.11% of all open interest, a huge decrease of 2.35% in their share since last week, and now stand as a group at 189,780,000 ounces net short, which is a decrease of over 44 million net short ounces from the previous week!!!

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Large speculators sold off 1,148 longs and gorged on 4,468 more short contracts decreasing their net long position to 132,280,000 ounces, a decrease in their net long position of over 28 million ounces from the prior week.

 

Small speculators picked up 496 longs and added a huge 3,721 short contracts for a net long position of 57,500,000 ounces a decrease of over 16 million ounces net long from the prior week.

 

The producer merchant unloaded in a big way this reporting period covering shorts and selling longs while the swap dealers bought longs and covered shorts by about the same magnitude.

 

The swap dealer category of the commercials are now net long by almost 11 million ounces.

 

This is the 4th straight week the commercials have added longs.  Over that period they have added about 9,500 longs.

 

What we may have seen on Wednesday, after the COT period, is the speculators dumping short positions for profits while realizing the commercials are in a good position to take price far higher.  Their interest in obtaining profits may have forced some commercials out of some of their new long positions.

 

Gold followed silver with pretty much the same numbers and ratios but the most interesting statistic was the gold commercials percent of open interest dropped 3.7% from 53.99% to 50.29%  Just 3 weeks ago the gold commercials percent of total open interest was 56.49%  Silver bugs like to think theirs is the most insidious manipulation but gold commercials and the gold producer merchant are always a few percentage points higher in net shorts than is silver.

 

Have we seen the bottom to the metals?  No one can say for sure but my guess is the commercial long buying is signaling at least a temporary bottom.  But, just so everyone knows, the week of last May 22 saw the commercials with just 76 million net short ounces and the producer merchant at 153 million net short ounces.

 

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    • This could mean the cartel is trying to go long. The COT report was of course last tueday. It was after that, when we saw the extraordinary volume spikes. They could be net long by now at least in gold.
       
      If that’s the case, they just underwrote Jim Sinclair’s statement.

    • Buenos dias. My belief is that on the date THEY have all agreed to crash the system, they will crash it, regardless of the short and longs of it .. I believe that will be on March 21 or 22. This opinion is based on this excellent article on 25 important events in March, including the ‘real Mayan end of the world’ ..  not Dec 21, but Mar 21. The Georgia guidestones are exactly 33 years old on March 22 (the twin towers were exactly 33 years old on 9/11). The Dark Knight movie shows 322 on a box of seats just before a nuclear bomb goes off. There is supposedly a ‘doomsday’ planet alignment on March 20, and Clif High and David Wilcock give strong signals of big events in March 2013 (I believe both are fakes, but nonetheless their predictions fit perfectly). The Spring equinox is on March 20, and the spring equinox was a date for ritual human sacrifice for the Mayans, who threw young boys and girls into the sinkhole (well or cenote) located right beside Chichen Itsa on this date every year, to appease the rain god, who lived at the bottom of the sinkhole. The Louisana sinkhole threatens several states in the South USA, and this was also predicted by The Dark Knight movie – there are several good youtubes on this.

      http://beforeitsnews.com/alternative/2013/02/no-kidding-march-2013-the-new-12-21-2012-25-events-to-watch-2565128.html

      Way too many events for coincidence. This article indicates huge events this March, and it is very ominous.

  1. Also big thanks from me Marshall great info. I couldnt explain it to the likes of Hapa and I think 4oz’s has a point about that. Perhaps if someone could follow up these reports with a laymans interpretation otherwise it seems a bit elitist for newbies/ oldbees just starting and for those whos life is to complicated to fathom it all out.
    Peace

  2. Harvey Organ used more elaborate and detailed words, but was more clear as to what this means. Unfortunately I do not know his track record.
    I still would appreciate if someone could summarize in more layman’s terms.
    I’ve been saying for a few weeks that the commercials are not only creating a low price to make profits (not just get out) on their shorts, but at the same time go long. Perhaps one biblical last time? Or an intermediate time, to be repeated?
    Not sure when or what made me start to realize that all the crash JPM buy silver was missing the point. Perhaps stories of big banks actually having their vault full of the good stuff. And the idea of central banks leasing out gold to end up in these same vaults.

    Quick Q: if the end game takes place, at what price can the big banks settle in cash with the US for the leased gold they will not return? The $48 something figure or the spot price? I think this odd twitch in FED accounting is being lost out of sight lately with all the dramatic one-liners calling out the wicked evil manipulators by their first names. The cartoons, etc. It just takes our attention away from what is happening right in front of us, not even hidden really. The cartel will not capitulate to our relentless buying, they are counting on our little cult to be the ones to double the value of their long and physical the first few times over. 

    Gold have more shorts, could that be due to the metal actually not being needed for much of any purpose? It’s hoarded mostly, right? Left or right, it’s ending up in someone’s vault. Jewelry is just a tiny use for it, and recycling likely can cover most of that demand. With more free supply (beyond industrial demand), I can see shorts having more room to breathe. Easier to keep the price subdued, as we’ve seen over the past decade. We can’t say that there were no  proper efforts to keep silver down. The reason we should not forget, the price is kept down by those accumulating, not JUST trying to deprive us of wealth. 

    • I posted this earlier but believe the cartel is beginning to figure out the silver short squeeze will continue until silver prices move upwards of $40 or $50.  The reason is many of the silver miners break even point is around $28 to $31 and with prices constantly hovering or touching these points it makes them cut back to stay profitable plus they are having layoffs and hiring freezes.  This is not bullish for silver production!!  

  3. 4OZ, I think the message is pretty clear, they have loaded up longs because they intend to let the price rise at some point soon though it could dip into 27-26 range before they let it go up.

    Luigi, the commercials, as a whole, are not going net long and probably never will.  People who write those articles have a vested interest in selling gold.  

    Remember the nature of a futures contract is that it consists of a long and a short.  For the commercials to be net long means the speculators would have to be on the short side of all that.

    It is never going to happen.

    Anyone who believes that nonsense is setting themselves up for failure and disappointment because the commercials, particularly the producer merchant, holds such a high percent of open interest making it mathematically impossible for them to go net long before the speculators get wise and refuse to buy any more shorts.

    Anyone who writes those articles is dishonest in my humble opinion.  And there are a lot of them out there!

    What is far more mathematically likely is to see a collapse in total open interest as the commercials try to reduce their exposure.

    Remember, this is a numbers game for the commercials whether they are in it for profit or to manage the price of the metal.

    • @Marshall,
      “For the commercials to be net long means the speculators would have to be on the short side of all that.”
      Isn’t that what we are seen in these figures? At least the week’s changes are reflecting a net move in this direction?
      Why is someone writing against your humble opinion of future reality by definition dishonest?

    • It’s dishonest because it is both mathematically and idealogically impossible for the commercials to becomes net long.  Has nothing to do with what anyone thinks I say.  I don’t think anyone who writes these articles cares one iota what I say.  They write those articles for the hype and to further their own business interests.

      What we are seeing is a limited term move to buy shorts on the part of a subset of speculators who are in it for the short term profits. As soon as they cover their shorts we can bet the commercials will buy more shorts as the speculators desire to go long and the commercials buy the shorts complementing those longs.

      This is a game that keeps repeating itself over and over again.

      Same merry go round…

  4. Covering a bunch of shorts doesn’t necessarily mean the end of naked shorting by this bunch.
    I would be delighted if they went long, therefore they won’t.  These guys aren’t trading to make money, they defray their costs via their trades but the mission isn’t about making money on PMs.  Dropping thousands of contracts onto a sleeping market on a holiday proves that. It’s about keeping the oxen hitched to the plow of the paper paradigm, and under centralized control.  PMs make ‘every man a king’ and are to be destroyed if possible.
    The end comes after a technical default.  Patience.

  5. Need some help. Some time ago a member of SilverDoctors had a guest post about making a, I think wireless, phone by altering one or two old land line phones.
    I think this person learned this skill serving in the military but I’m not sure. If someone can post the link it would be much appreciated.
    Thanks.

  6. So if I read this correct, commercials are the miners, they obviously would want to be short to cover mining production. But if read this correctly speculators are selling longs and buying shorts? Doesn’t this mean bad times for stackers who are natural longs? If speculators are shorting more then they are betting on the price of metals going down?

    • There are two categories of commercials, the producer merchant and the swap dealers.  The miners are primarily in the swap dealer category.  This is just a temporay situation where the speculators are buying a lot of shorts for short term profit and we may have already seen the end of it after the COT period up to Friday.  Next week’s report will tell the story.

  7. Random thought. Could miners decide to take up longs when they perceive the cost of mining FOR THEM to be higher than the paper price? Buying the silver at current prices would actually be beneficial to them compared to taking it out of the ground. Should they have contracts with customers at given volumes and price points (especially when higher than paper price), their longs would already guarantee them a slight profit, and then have silver to spare from their own production to sell into the market as they please.

    • I think that is only logical.
       
      In addition, a lot of the time these miners contract a huge amount of future in the ground at a specified price so they have to hedge one way or the other over time to maximize their profit potential to stem potential loss.

      SRSrocco has written a lot about falling EROI which necessarily causes metal prices to rise over time.

      If the metal prices do not rise for a while then supply tends to dry up somewhat awaiting the price of oil to fall or the price of metal to rise and make mining lesser ore grades more economical.  We are reaching the point where industrial demand AND investment demand are so high that price cannot stay down for very long or the demand side of the equation becomes very noticeable.

      This is the precise reason I expect a future price collapse to take place at some point because I believe the commercials will desire to rid themselves of the shorts once there is an oil squeeze somewhere in the middle East.

      They will not keep those shorts into an oil squeeze but they will not be able to go long much either because no one will buy the short side for very long.  

  8. MS…well done. Two comments.

    First point. COT report has taken on a different flavor since the recent default of two brokerage houses forcing responsible institutional money to other venues because of the now known risk. 
     
    Second point.  Not all shorts are created equal.  There are strong shorts and there are weak shorts.  Strong shorts like JP and HSBC can force the market lower when they need to cover, like what happened over the last two weeks.  Weak shorts are what is left and are the fuel for a potential short squeeze, like we’ll see this week or next.

    • ON the first point I agree paper investors give more critical thought to where they place their futures bets from.
      On the second, that is exactly correct.  The strong shorts know with absolute certainty when they are going to force the price lower to reap the reward whereas all other shorts are just a bet on a possibility no matter how educated the guess and if the weak shorts profit they are lucky.

  9. Question:
    As the title mentions naked shorts, and then doesn’t specify it, at least in this instance (I am behind on my COT reading).
    How do we tell from this report that any shorts are (or were) in fact of the naked variety?
    JPM is often credited with/blamed for huge naked shorting, and then we hear they happen to have huge vault stuffed with the goodest of goodness. So they are either backing up shorts are we’d want them to, or stacking the deliveries of their longs or under the counter purchases, right?

    Thanks!

    • Then, the title including the word “naked” is a bit too presumptuous perhaps? It’s after all very unlikely that every short tallied under commercials was/is in fact a naked one? That would be overly sensational and tendentious, and as the odds are : most likely incorrect?
      If commercials are to cover the miners, then by definition, not all shorts can be naked. And we know that at least some large banks do hold an amount of bullion is some form of ownership or another. And, there’s been plenty of articles the way banks take possession/control over physical. Again, a reason for me to wonder how many of the shorts really are naked after all. 
      But what do I know, I didn’t go to school and been reading on this for only a short while.

  10. BY the way, I do not write the titles.  
     
    I submit the article to DOC and he decides what the title will be because my subject title for the article is merely the date of the COT.  ;)
     
    He is the one who sensationalizes it!  LOL

    I guess I am just a very boring “by the numbers” guy and DOC feels the need to liven things up a bit…

    And to clarify, I think he says naked because that metal does not exist in the official warehouses. That does not mean they don’t have metal stored in the Antartic somewhere ;)

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