By SD Contributor Marshall Swing:
Gold & Silver COT Report:
Commercials sold 1,699 total long contracts and covered a whopping 8,769 shorts to end the week with 46.66% of all open interest, a decrease of 0.45% in their share since last week, and now stand as a group at 154,430,000 ounces net short, which is a decrease of over 35 million net short ounces from the previous week!!
Large speculators sold off 1,304 longs and added a huge 3,415 more short contracts decreasing their net long position to 108,685,000 ounces, a decrease in their net long position of over 23.5 million ounces from the prior week.
Small speculators decreased their long total by 2,639 contracts and reduced their shorts by 288 contracts for a net long position of 45,745,000 ounces a decrease of almost 12 million ounces net long from the prior week.
Silver started the COT week at $29.43 and closed at $29.40 with a low of about $28.25 From the low price worked its way up to about $29.50
On Wednesday of the COT week, we saw a tremendous selloff accounting for the massive short coverings by the commercials. Interestingly, it was the swap dealer who covered the majority of the shorts and also picked up 2,933 long contracts to their total and now stand at almost 40 million ounces net long.
It is truly the swap dealers who have led this charge to the bottom as the producer merchant portion of the commercials still has 194 million short ounces at their disposal.
Have we defined a bottom? While many writers are saying the bottom is in, I caution everyone to realize there is still a massive amount of damage that could be done as in late June the combined commercials were at 60 million ounces net short and as of COT close last Tuesday afternoon still have 154 million ounces net short. At the same time last June, the swap dealers were 98.5 million ounces net long and the producer merchant was at 158.5 million ounces net short. So, theoretically, we might have another 150 million ounces to the downside before a true bottom is defined.
Of particular note, the large speculators have taken close to 9,500 short contracts in the last 3 periods so my thoughts are that the commercials will punish those speculators to the upside so they do not build on their profits then continue the downward trend. The small specs also picked up about 4,500 short contracts over the same period. This past Tuesday morning we saw the commercials engineer a big gap up in price but judging from volume I do not think they were able to shake out a lot of the speculator shorts. Price deteriorated from there at about $29.50 down to $27.92 on Friday morning so the speculators may be battling to save their short profits.
If the speculators are fighting it out amongst themselves for a lower price then you can bet the commercials will take full advantage in the near future.
In gold, the price rise last Tuesday morning was much more powerful than in silver and gold may be the new front for the precious metal price war. The large specs bought over 6,000 long contracts near the bottom at $1554 around Thursday of the COT week and may have profited handsomely by selling after the high at $1620 on or since late Tuesday morning.