Tuesday, March 29, 2011

Disaggregated Gold and Silver COT

HOUSTON – As we move into the last few trading days and hours of the first quarter, traders seem to be in a mood to book profits.  Both gold and silver are showing a light shade of red in the early going of this COT reporting cutoff Tuesday.  Gold is trading below the $1,420s, an area that might have provided one line of support if the market for the yellow metal was robustly bullish.  Silver is tracking with gold with the gold/silver ratio holding in with a 38-handle.  

After today any influence that could have been attributed to options expiry is gone, but quarter-end book squaring and window dressing are still in play.  Bargains for small resource companies remain exceedingly scarce, but we bargain-hungry Vultures remain very patient, perched just above and watching the battle between bulls and bears, wondering which of the beasts we should prepare to feed upon.   

Meanwhile reports of very strong Asian appetite for gold and silver continue to surface and may be intensifying.  We will end this web log comment with one of many such reports.      

Just below is another excerpt of the full Got Gold Report (GGR), which was delivered to subscribers and posted on the password-protected member pages on Sunday afternoon.  To subscribe, click on the GGR subscribe link above and to the right.  

Disaggregated COT Report (DCOT) 

Other than the troubling complete reversal from way long to short by the Other Reportable traders in gold over the past four months, there is not all that much in the way of unusual action in this week’s disaggregated COT report, so this week we have distilled the report into a new table below.  

Gold and Silver Disaggregated COT Report 

Source CFTC for COT, Cash Market for gold and silver. 

In the table a net short position shows as a negative figure in red.  A net long position shows in black.  In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position.  All of the traders positions are calculated net of spreading contracts.  

As gold added $32.18 or 2.3% we see the Producer Merchants doing a modest amount of selling into the rise, joined by the Other Reportables and the Swap Dealers.  All the usual suspects were unanimous in the desire to increase their net short positioning with gold approaching its all time high.  We see the Non Reportables (smaller traders not required to report their trades) doing most of the gold futures buying with an assist from Managed Money (includes hedge funds, long-only funds, CTAs and perhaps some CITs).  


As silver popped a big $2.13 or 6.2% the Swap Dealers took the short side the most this reporting week, but certainly not aggressively. The Producer Merchants (and bullion banks) were willing to add a small 534 contracts net short (not much) with once again the Non Reportables doing the most buying, slightly more than Managed Money.  

In short (no pun), there was not all that much action this week in the DCOT.  

Just below is the graph depicting the Other Reportables positioning in gold, the one graph that gives us pause here at Got Gold Report.  Importantly these are large, reporting traders that have been consistently net long gold for a very long time.  Indeed they have been net long for all of the disaggregated dataset provided by the CFTC – until now.  We are wary now in part because of this fact, but we have no historical data before 2006 to compare to their actions today.  Here’s the graph: 

Source CFTC for COT, Cash market for gold.  

Clearly the Other Reportables are positioning for weaker gold prices ahead.  We cannot ignore this graph and feel duty bound to bring it to our subscriber’s attention.  

As we said last time: … we strongly suspect we are nearing an important turning point in the small silver market, but until we see more aggressive selling behavior by both classes of commercial traders, we have to conclude that the commercials have not yet become confident in lower (gold and) silver prices just ahead.  

If they were more confident in lower (gold and) silver prices, we would undoubtedly see the open interest rising abruptly, the LCNS shooting skyward and the price action unable to make new all time highs for gold and new 30-year highs for silver.  (New higher prices are defacto evidence that the up-trends are still in place. Argue with them at ones peril, but be watchful for when the commercials become bold enough to become aggressive.)      

As always we only want to deploy our short-term trading resources when the odds are heavily in our favor.  Since we missed the most recent buying op in January, we are in that time where patience is our most important asset.  

End of excerpt. 


Quote:  “Japanese premiums for gold bars remain at 3-year highs as Japan has seen safe haven demand for gold surge in the wake of their crisis. Japan looks set to become a net importer from a net exporter of gold. Indeed, Japanese demand on concerns about their bond market (see news) and currency debasement is another catalyst for gold to reach much higher prices in the coming months and years. 

Asian demand is especially strong in the increasingly important China. The Chinese strong cultural affinity and love affair with gold (primarily due to a distrust of Chinese paper money) shows no signs of abating. Indeed, it may be accelerating as was seen in the recent figures from the Shanghai Gold Exchange and customs in China and now reports (including from CNTV – the national TV station of the People's Republic of China) of shortages of raw gold or unrefined gold. …” (More)

CNTV video of gold shortage in China. 

Above from GoldCore.com with our thanks.  


That is all for now, but there is more to come.  



The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

"I've been a huge fan of Gene and his amazing work for years..."

Brien Lundin, CEO, Jefferson Financial, Host of the annual New Orleans Investment Conference and Publisher of Gold Newsletter

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