Submitted by SD Contributor Marshall Swing

Silver COT Report 8/24/12

 

Commercials sold off a huge -4,651 longs on the week and added a whopping 4,424 shorts to end the week with 46.48% of all open interest, a minor change of +0.35% in their share since last week, and now stand as a group at 162,385,000 ounces net short, an increase of over 45,000,000 net short ounces, or an astonishing 38% increase in their net short position in a single week!

 

Large speculators gorged on 3,329 longs while being forced out of -2,284 short contracts improving their net long position to 106,000,000 ounces, an increase in their net long position of over 28,000,000 ounces from the prior week.

 

Small speculators also had their fill of 2,676 net longs and gave up -786 shorts for a net long position of 56,385,000 ounces an increase of over 17,000,000 ounces net long from the prior week.

 

The commercials sold longs big time this past reporting period as they knew they had big profits secured and written in the stars.  The previous two weeks they had bought about 4,100 longs and they sold that number plus over 500 more contracts for sizeable profits.  But remember, the COT week always runs from Tuesday to Tuesday so in this case from 8/14 to 8/21 pit close.  The price was about $29.25ish at Tuesday’s pit close this week and price now is about $30.73.

 

Buying massively and just prior, the commercials knew, without a shadow of a doubt, this price rise was coming and they were well prepared to profit from it.

 

The real question here is why sell so many longs when they could have waited a little longer and made even more profit?  Is that a signal they do not expect price to run much higher or just their algorithms saying it is time to take profits on contracts that were previously bought at lower prices?  Chances are they have profits at about $2 – $2.50 an ounce on 4,651 contracts.  If so, that is about $46.5 million to $58 million on their sale.

 

Remember, the 4,651 contracts they sold may not be the same ones bought in the previous two weeks and could have been purchased at slightly lower prices than those of the previous two COTs.  Prices have not been below $26 since November of 2010 and these longs sold were probably in the upper $26 range.

 

The combined total of longs picked up by the speculators was about 6,100 and it is very interesting that this far outnumbers the shorts picked up by the commercials at 4,424.  That means the amount of shorts covered by the speculators was far higher than the numbers show and that they have also bought a significant amount of shorts to go with their long purchases.  This means a subset of those speculators bought those shorts and they got creamed in the action after Tuesday of this week because price rose significantly.

 

As of this writing, price is at $30.73 which is $3.30 higher than the beginning of this mania 8 days ago.

 

It is also noteworthy there has been no serious attempt by the commercials to limit this long run.

 

The producer merchant’s short silver position stands at -211,620,000 ounces and they have not been this much net short since the magical date of February 28th of this year.

 

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/index.htm and email addresses as well:

 

ggensler@cftc.gov  Chairman Gensler

 

bchilton@cftc.gov  Commissioner Chilton

 

jsommers@cftc.gov  Commissioner Sommers

 

Somalia@cftc.gov  Commissioner O’Malia

 

mwetjen@cftc.gov  Commissioner Wetjen

 

dmeister@cftc.gov  Director Meister

 

See you next week!

 

Marshall

  1. Up $2.73.  Gain 8.86%  Not too shabby, but could have been better.  They forgot to watch the upper hook that’s on the way….(food inflation)  Intermission time.  Have a good weekend, and save my seat.

  2. I hope that their expectation that silver will not run higher is true and that silver’s price go back to 27$ per ounce or even lower is true cause that way, you can buy silver cheaply. Whenever silver’s price goes up,you keep thinking about if only you could buy silver when it was low.

  3. this is all paper silver, I don’t know about being short 200 million+ ounces, how the f do they get away with creating silver out of thin air? Isn’t that what is going on here? I don’t know enough about the cot reporting. It seems designed to lack transparency.

    • Also, the other question is where is the 200 million+ ounces in physical form? From which company did they bought it from? Which mining company mined that much silver? Why doesn’t the COMEX show their “physical” silver reserve?

  4. I don’t think that I have ever seen so many people work so hard to accomplish so little as these paper silver manipulators.  It is outrageous that the price of this paper trash controls the price of beautiful and useful REAL silver.  This is no different than the prices of pictures of food costing more than the food itself.  If you are hungry, you don’t want a bunch of fool pictures of something to eat!  GRRR…
     

  5. JPM’s silver desk has its butt in a huge crack and can’t get from their short positions.   Larger deliveries of silver are stalled or non  existent.   JPM knows if the price shoots  any higher they are going to eat billions in losses.  But this loss may be small potatoes compared to the LIBOR and IR losses impending. They may be forced to fall on a silver sword to preserve  their other positions  against hundred billion dollar losses.
       JPM may be a one trick pony in accumulating more short positions thinking they can execute another price smack down and exit their positions.  They might get a feeble price decrease but the other forces are to powerful from these tricks to work any more. If silver holds above $30 for a week, this could be the death knell of these shorts and capitulation is at hand. All this action would do is delay the inevitable as the buyers will extract the deliveries from the market without giving JPM and HSBC the needed price drop to sell off their holdings to stooges foolish enough to play into their hands.  The bigger forces at work such as critical delivery shortages and supply curtailments will kill that paper market in a month or less IMO.  AS LBMA so goes COMEX and thus the price of silver. 
    Gold is also in the same bind.   Supply, demand, paper and price increases are operating within the same set of forces.  The GTSR contraction should also create some sparks as gold ramps up and draws silver in its wake.

  6. According to Harvey Organ in his Thursday Gold and Silver Report, the Outstanding Interest for September Silver, with a week or so to go before first day notice was 32,420 contracts which is 162 million ounces. Hopefully there will still be 10000+ contracts left by then and that they demand physical delivery outside the fake LBMA/COMEX system. These criminal a**holes at the Comex and the LBMA need to be smashed permanently. Apparently USA and Europe accounts for only 21% of demand for precious metals yet they get to set the prices.
    How on earth is that allowed. What the hell are miners playing at allowing this.

  7. As the Housing Bubble Burst so will the Naked shorting by the Crooks ,I experienced first hand 20 years ago trading on the Pink Sheets and watching spread like a Cancer all the way to this JP thing , while all the Gov agencies look  away,but this is the END ,..I hope.

  8. EVERYBODY ACCUMULATING PHYSICAL IS JUST SMILING AT THE MOMENT….
     
    This increase in shorts only means two things: They are planning another big smack-down or they are already drowning and doing everything they can to stay afloat. But at the end result will be the same. They cannot exit this silver hole they dug themselves. After all, Max Keiser will most probably be right…

    • Doc-
      Commercials are people that are in the business of producing, importing, exporting etc.     They are using futures to hedge production etc.     
      When a producer sells a commodity they sell a futures contract and then deliver physical commodity.    So you think of it as shorting but it is the mechanism of the exchange.  The commercial producers deliver against contracts which they sell.
      If there is no demand then commercials are not selling contracts because they have no one to deliver physical to.
       

      http://en.wikipedia.org/wiki/Commitments_of_Traders

      “As one would expect, the largest positions are held by commercial traders that actually provide a commodity or instrument to the market or have bought a contract to take delivery of it”
       
       

  9. @ClintZ to clarify, the commercials category contains positions held by bullion banks, producers, users, and large dealers.
    Yes, I agree that shorts by producers and large dealers are simply attempting to hedge their physical positions.
    However the bullion banks clearly do not have a large physical position they are hedging…they claim they are hedging positions for clients or for their derivatives positions, but most believe they are truly naked shorts.

  10. @ClintZ  

    We know there are multiple players in the COT with multiple agendas.  I make it a point, regularly, to explain to people the real story behind the numbers is much more complex than the numbers themselves.  The numbers in the COT are net numbers which only provide the result of the tallies not the blow by blow.  Writers have been making their valiant attempts to explain the numbers for many years and no one is 100% right all the time.

    You take a bit of a cheap shot without making a point…  

    What is your point? 

    • The point is to make sure people know that its not bearish for commercial net short to increase.   All bullish moves have corresponding increases in commercial shorting. 
      These COT reports though I question in general.  Just like all government data, the figures can be adjusted with the click of mouse.   The COT reports are what happened last week, and we are in a time of high frequency trading.   10,000 trade per second frequency.   4G
      The thread seemed to follow the track “OMG they are shorting again, massively”
       
       
       

    • You are correct to point out a commercial net short increase is not in and of itself bearish.  

      In fact any time the price rises the commercials buy shorts to some degree.  The data shows that clearly.

      I did not intend to point out the huge increase in their short position to say a massive raid is going to ensue or I would have said so.  I think it could go either way.  The commercials took out a huge block of longs the week before the price rise.  That means they knew the price rise was coming because the speculators sure did not prepare themselves stocking up with longs. I find that point very interesting in that for several weeks the commentators have been talking about big price rises and the speculators did not stock up.  The speculators reacted they did not lead.

      But what is also important and perhaps most important is the degree to which the commercials are net short.  The historical data shows time and time again that they only let that go so far before changing the landscape.  The producer merchant is extremely net short right now and probably will not allow that imbalance to continue much longer.

      Also important is how many shorts do the other speculators pick up during these periods.  That number may have been  significant this time as I tried to show.

      Thanks for the discussion! 

  11. I have a problem with the forum. I tried posting something on the forum on the “Silver” section but my post doesn’t appeared. I tried 3 time and it didn’t worked. So I waited 45 minutes just in case if my forum did appeared but it still didn’t. I posted a fourth time and it still didn’t appeared. I was using Firefox to do it and yesterday, it worked perfectly fine.

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