Submitted by Marshall Swing:
Silver COT Report 10/26/12
Commercial paper stacks sold off a small 435 longs on the week but led short covering raids utilizing -2,030 shorts to drop the price to end the week with 45.18% of all open interest, a decrease of -0.63% in their share since last week, and now stand as a group at 277,495,000 ounces net short, which is a decrease of just about 8,000,000 net short ounces from the previous week.
Large speculators were forced out of 1,578 longs by the downward prices but added 414 short contracts decreasing their net long position to 190,680,000 ounces, an increase in their net long position of just under 10,000,000 ounces from the prior week.
Small speculators sold off a small 544 longs and took advantage of the price drop to make some money by covering 941 short contracts for a net long position of 86,815,000 ounces a decrease of over 1,000,000 ounces net long from the prior week.
At the close of the COT reporting period on Tuesday afternoon, silver was about $31.70. The beginning of the COT period saw silver at about $32.98 so the drop in price is about $1.30 for the reporting week. However, looking at price from Friday to Friday saw no change with silver at about $32.09 though there was plenty of volatility during the week.
While the price drop definitely hurt the large speculator’s profit margins, I believe the real story to be told this week is that for a mere 8,000,000 ounce reduction in the commercial’s net short position they were able to achieve a $1.30 drop in the price of silver. They had a little help with the small speculators covering a huge number, close to 10% of their shorts.
8,000,000 ounces change for the commercials is less than 3%. If they were able to get away with another 5 weeks of price reductions of this magnitude, silver would be trading under $26 and they would still hold a very high net short advantage, historically speaking, as compared to when silver was just above $26 a few short months ago.
As I have reported the last couple of weeks, the price reduction in the metals seems to be much more fueled by the battles going on for the gold price than what our silver commercials are doing here. What happens in these wars is that when the gold commercials attack their automatic trading systems set off like trades and affect silver speculators and Blythe and her boys enjoy a huge reduction in the silver price without having to expend much of their short position on the silver desk.
It sure has the appearance of a commercial tag team match to me…
As always, for your convenience, if you would like to contact the CFTC and express your views to them, I have provided you their phone numbers and I hope earnestly that you fill up their phone lines: http://www.cftc.gov/Contact/
firstname.lastname@example.org Chairman Gensler
email@example.com Commissioner Chilton
firstname.lastname@example.org Commissioner Sommers
Somalia@cftc.gov Commissioner O’Malia
email@example.com Commissioner Wetjen
firstname.lastname@example.org Director Meister
See you next week!