By 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.
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.