Gold & Silver COT Report 5/10: Commercials Now Net Short 72 Million Ounces in Silver!

goldcotBy SD Contributor Marshall Swing:

Gold & Silver COT Report 5/10/13:

Commercial longs added 18 contracts to their total and an additional 244 total shorts to end the week with 50.59% of all open interest, a minor decrease of 0.15% in their share of total open interest since last week, and now stand as a group at 72,280,000 ounces net short, which is a small increase of just over 1.1 million net short ounces from the previous week. 

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Large speculators added 114 contracts to their total longs covered a significant 1,347 net short contracts increasing their net long position to 68,255,000 ounces, a large increase in their net long position of just over 7.3 million ounces from the prior week.

 

Small speculators added 182 long contracts to their total and also picked up 1,417 short positions for a net long position of 4,025,000 ounces a huge decrease of over 6 million ounces net short from the prior week.

 

Silver was relatively quiet this past reporting period as commercials practically stood still while speculators made some small changes.

 

Large speculators took advantage of the prior Wednesday’s price drop of about $1 to cover 1,347 shorts and after price rebounded the small speculators took advantage by picking up 1,417 shorts betting price has not seen the bottom.  It will be interesting to see if they sold today at the low for the week.

 

In gold, commercials bought heavy longs and shorts while the large specs added to their short side just as they have done the prior 3 weeks.  Small speculators slightly increased their net short position.

 

The gold producer merchant significantly decreased their net short position.  With the swap dealer holding a significant lead over the producer merchant in net short position, we probably have not seen close to the bottom yet.

 

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Comments

  1. Maybe you should forward this information to that fella with the long hair at the CFTC?  I’m sure him and Deputy Dawg will be all over this, after all we need to be sure no one is attempting to manipulate the market. 
     

  2. What silver are they using to short the market?  Answer, none which is completely illegal yet allowed in fairyland!

    • Total open interest is only about 6x the silver in the COMEX approved vaulsomewhere needed speculators for liquidity.  If they want to short the market more power to them, I’ll be here along with many others to keep buying.  Mines can get hedge exemptions to allow them to lock in forward prices so they aren’t exposed to all kinds of fluctuations, that allows them to execute on contracts even if prices are low, in the meantime we can buy, and end users can lock in the long hedge for their business using the same hedge exemption.

    • Mikey go rrah rah your paper crap somewhere else, we are stackers and physical people. COMEX is crooked and illegal and the CFTC is ignoring things to support the dollar.

    • The info that I found on Wikipedia says that naked short selling is not illegal in the US but that “abusive naked short selling” is prohibited by regulation.  They go on to say that it is difficult for regulators to spot abusive naked shorting and that the reg against it is poorly enforced.  Stuff like this can make our heads spin… it isn’t but it is… seems to be the situation.
       
      That said, there is no reason for short selling rules for commodities to be any different than for stocks or bonds.  If someone wants to short silver, for example, I have no problem with that as long as they go out and borrow the silver they claim to be selling short… and then sell it.  If someone shorts a stock, this is what they have to do.  They profit by this if the price drops and they can replace the borrowed shares at a lower price.  The difference between the selling and buying prices is the profit they can make.  Naked short selling SHOULD be against the law but it is not clear whether it is or isn’t.  They use the term “abusive naked short selling” as the criterion for whether or not the short sale was against the regulation on this.   Personally, I do not care if a short is abusive or not since I would classify ALL naked shorts as abusive and therefore illegal.  Unfortunately, the limp-wristed types at the CFTC would not know a naked short if it jumped up and bit them.  The SEC seems a bit better at this but not much.
       

    • @Ed_B – Not sure what you read, but naked short selling *is* illegal.  “Abusive” comes into play when regulators attempt to separate instances where a short is undertaken by a seller that expects to be able to obtain shares (or a commodity) within a reasonable timeframe to serve the short — along with considerations regarding the magnitude of the transactions.  The trouble is, the regulators in both the US and Canada are too busy watching porn (not entirely an exaggeration) and blinded by the faith that the shorting does “good” by increasing liquidity (a retarded argument) and presumably, highlighting companies or an asset that is overvalued (which is a-okay for normal shorting but naked shorting is flat-out abused).
       
       
      One of the most simple and quick fixes to this insanity is to reinstate the uptick rule, where an asset can not be shorted unless the price ticks up first.  That reform alone would probably end over half of the naked shorting.  The trouble with naked shorting in equities without the uptick rule is that the firm doing the shorting can easily create a feedback loop that feeds on itself, crashing the price down and letting the attacker cover long before there even is a timefame for their failure to deliver shorted shares to even be an issue.  A similar thing happens in commodity markets but the settlement period is longer, which lets JPM and others get away with screwing around even more under the radar.
       
       
      In a world of High Frequency Trading, the uptick rule would kill order flow.  Over 80% of the NYSE volume on any given day is generated by these HFT paper pushers that give the illusion of a stock market with liquidity, while the exchanges rake in transaction fees.  This isn’t what capital markets are supposed to be about. It’s destroying the underlying capital investment cycle that gives birth to new and/or expanding companies. 
       
      One of these days all of this crap is going to come to an end.  Unfortunately, it will take another massive crash to at least hope people wake up and demand reform.
       
       
       
      There’s NOTHING wrong with standard shorting.  It’s an important part of a healthy market.  Naked shorting, on the other hand, is an abomination.
       

    • Mary, you misinterpret my post.  I stack like all of you, mostly silver due to ease of cost averaging, but starting to think I need to have more exposure to gold.  There is a lot of misinformation here 

    • bumped send…. Misinformation in people’s replies about the paper markets, I have an understanding of those and try to share for those who care to listen.  I do not have a good understanding of the physical markets or cash markets, other than the premiums I see for silver products, I am here to hopefully learn

    • more aboutthat physicalmarket.  i don’t think we’re going to see a meltdown any time soon, but i am not so sure i’m right that i am ignoring physical
       
       

    • Well, crud.  I replied to this earlier today but the system choked on me and did not record the reply… so… here goes again.
       
      “Not sure what you read, but naked short selling *is* illegal.”
       
      My point was of a technical nature.  I am looking for the reference in the US code that specifically and clearly states this but have been unable to find it.  If you have such a reference, please cite it.
       
      ““Abusive” comes into play when regulators attempt to separate instances where a short is undertaken by a seller that expects to be able to obtain shares (or a commodity) within a reasonable timeframe to serve the short — along with considerations regarding the magnitude of the transactions.  The trouble is, the regulators in both the US and Canada…”
       
      Loosely written laws like this allow for a great deal of easily abused interpretation.  It basically asks to be abused and the bullion banks seem only too happy to comply.  As suggested, the regulators are nowhere to be seen on this issue.
       
      “…and blinded by the faith that the shorting does “good” by increasing liquidity (a retarded argument)…
       
      Shorting DOES do good but I question whether or not it is a liquidity issue.  Instead, it is a way to temper irrational exuberance in a high-flying stock that, upon close examination, has more than it’s share of warts.
       
      “One of the most simple and quick fixes to this insanity is to reinstate the uptick rule…”
       
      Agreed.  Additionally, I would like to see the Glass-Steagall Act reinstated.  If banks want to gamble with money, let it be THEIR money and NOT depositor money.  Making this change was a superb example of “it wasn’t broke so the government fixed it until it was”.
       
      “One of these days all of this crap is going to come to an end.”
       
      Agreed.  My only question is, “Will it be a managed crash with survivors or one of those nose-first face-plants from which no one walks away?”.

  3. I doubt the futures market was created to provide a casino for lazy cubicle slugs to siphon profits away from producers by clever buying and selling of paper contracts solely for dollar gains.  It has become an unregulated casino where the guys with the deepest pockets can’t be beaten.
    It is corrupt, the majority of trades involve people that neither produce nor hold the underlying product.  The sellers don’t have it, but that doesn’t matter because 90% of the buyers don’t even want it.  Factor in the captive regulators and you can see we have grave problems.
    It has become absurd.  It should fail, and it will.  I only hope it’s soon.  Like yesterday.
     

  4. Absolutely not, it was designed to connect producers and users.  but if all you have is producers wanting to sell at $40 and buyers wanting to buy at $30 then you have no market at all.  speculators are an important part of the market, though they should be kept in check.  There would be no speculators if they couldn’t make money

    • Yeah, that’s when “the market-maker” steps in and buy for $30 from the seller and sells for $40 to the buyer ;)
      I don’t think anybody is against speculation as long as the speculators themselves are not pushing the market around (or even painting the price on a chart by flooding the market using unbacked promises). The problem in the end is as always their cheap unlimited credit from the magicians at the central banks. It always goes back to the CB enablers, always.

  5. The FX markets are the driving force of the paper sell offs in the metals.  The dollar/Yen crossed 100 yesterday.  That drove the dollar higher taking down the metals and crude.  This has nothing to do about the physical demand for the metals.  This seems like a short term sell off.  Late in the day, the metals recovered most of their losses especially silver.  The 10-year Japanese bond exploded yesterday morning.  Up a huge 16% causing a halt in trading.  it won’t take much of  a rise in yields to blow up Japan.  They are currently paying 60% of their tax revenues just to the interest on their debt with these rates at almost zero.  The 10-year bond rose .10 to .70 on the 10-year in one day.  A .10 increase seems small but it’s still a 16% increase!  If we had that in the US, it would be huge news.   The focus has been on Europe mostly but Japan seems like a bigger threat short term.  With the Yen getting smacked around, this will cause the US and Europe to devalue really soon.  The Japanese are pulling their money out of their bond market and trying to find some yields elsewhere.  This is created some cracks in the markets.  I think people tend to focus on the short selling of the metals to understand the sell offs.  Lately it’s been about the currency devaluations that need to be paid attention to understand the take downs.  if you are interested in understand the Yen carry trade and the Japanese situation better, here is a great video explaining their problem.  When Japan goes, it could take take everything.
     


     

    • good note, then yen chart is a freaking disaster

    • “They are currently paying 60% of their tax revenues just to the interest on their debt with these rates at almost zero.  The 10-year bond rose .10 to .70 on the 10-year in one day.  A .10 increase seems small but it’s still a 16% increase!  If we had that in the US, it would be huge news.”
       
      That would certainly be worthy of news coverage but my guess is that the US financial media would sweep it under the rug as fast as they could.
       
      “The focus has been on Europe mostly but Japan seems like a bigger threat short term.”
       
      Agreed!
       
      “The Japanese are pulling their money out of their bond market and trying to find some yields elsewhere.”
       
      Yes, they are doing that but they are also buying gold in record amounts.  If the stories we are hearing are reliable, there are lines around the block at many Japanese jewelry stores these days and premiums are very stiff.
       
      “I think people tend to focus on the short selling of the metals to understand the sell offs.  Lately it’s been about the currency devaluations that need to be paid attention to understand the take downs.”
       
      Agreed.  We need to keep an eye on both of these and not just one of them.
       
      Excellent video.  I hope that they do a follow-up wherein more detail is offered about how they expect a failing yen to affect other currency and bond markets around the world… especially in Australia and North America but in Europe as well.

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