Gold & Silver COT Report 6/28/13
Commercials continued their pace during the reporting period and moved 9.25 million ounces towards becoming net long.
Large speculators cut their net long position by over 75% moving 15.33 million ounces towards becoming net short.
Small speculators moved over 6 million ounces net long.
Commercial swap dealers packed on almost 2,400 new longs and covered some shorts and continue to move more net long.
Last week’s silver move to the downside was primarily due to a short covering raid by the commercials but was equally enforced by trader’s only offering lower prices for the metal and large speculators still willing to take short positions into the decline.
After the COT week, we saw a decline into the $18 range but on low volume.
Friday morning saw massive volume with almost 18,000 contracts, almost 90 million ounces, trading in one hour alone and price moving from $18.72 to as high as $19.44 during that hour. Price is now at about $19.70 This volume and movement is showing sustained interest in buying silver at slightly higher prices and is symptomatic of one or more traders with deep pockets believing a bottom could have been made and seeking to take advantage of it. My guess would be this was a hedge fund rather than a commercial player because if the commercials knew the bottom was in they would have bought far heavier.
Gold saw tremendous new open interest of almost 14,000 contracts and there was a massive short covering by the swap dealers and that could be the reason both market saw downside on Wednesday and Thursday last week, after the COT reporting period. Of particular note, the gold producer merchant bought longs and shorts heavily so there seems to be some division there and their short buying needs to be watched as that could signify a bottom. Large gold speculators took almost 8,000 new short positions but remember they are always ‘flying blind’ as far as knowing when the bottom will be made. It is the commercials who determine when the bottom is made by virtue of them having 47% of all short and long contracts.
Much has been written in the last week about price approaching or breaching the cost of production. It should be a reminder that mines usually sell product far in advance and most locked in their production at significantly higher prices. Also, they do not have to sell product at the spot price. The spot price is just a marker from which to do business.