Friday, September 21, 2012

Gold and Silver Disaggregated COT Report (DCOT) for September 21

Table Totals Mask Stunning Changes in Commercial Trader Positioning

HOUSTON -- This week’s Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday.  Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below. The recap masks massive changes in positioning by the traders the CFTC classes as “commercial.” 

20120921 DCOT

 
(DCOT Table for Friday, September 21, 2012, for data as of the close on Tuesday, September 18.   Source CFTC for COT data, Cash Market for gold and silver.) 

Continued...

In the DCOT table above 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. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting “longer” and red figures are traders getting less long or shorter.

All of the trader’s positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week’s technical changes, should be completed by the usual time on Sunday (by 18:00 ET).

 
That is all for now, except to mention that the table above masks very large changes in the positioning of the Producer Merchant and Swap Dealer commercials, which we will look at further - later this weekend.  Below is the graph of just the Swap Dealer’s number of spreading contracts, which anyone can see exploded higher, offsetting a large reduction in the number of contracts held by the Producer Merchant commercials, including bullion banks.

20120921 DCOT Gold SD Spread

 
Swap Dealers increased their spreading contracts by a staggering 33,561 lots or 108% in one week.  We believe that to be a record increase in the number of spreads put on in one COT week.  At the same time the Swap Dealers increased their pure short positions by 14,565 lots.  Meanwhile, the Producer/Merchant commercials, including bullion banks reduced both long and short positions by just under 30,000 lots each.  Below is a graph showing just the Producer/Merchant short positioning, which fell by a very large 29,930 lots to 236,273 contracts short gold.  (Their long positions fell by a similar amount.)

20120921 DCOT Gold PM Shorts

When we first saw the figures we assumed there had been a mistake, but after double checking, they are what they are.  It is as if a very large block of contracts has been reclassified from Producer/Merchant long and short to Swap Dealer spreading. 

If one was looking just at the legacy COT report, and only at the net positioning of commercial traders, they would have seen an increase of 12,542 contracts (5.3%) to the combined commercial net short positioning (LCNS), which is perhaps less of an increase in commercial hedging than we might expect for a $39.85 or 2.3% advance in the price of gold - with gold near potential technical resistance.  They would have also missed the almost 30,000-lot evaporation of the Producer/Merchants from both the long and short sides of the battlefield.  The graph below shows the legacy COT positioning of the combined commercial traders, which includes both the Producer Merchants and the Swap Delaers as a group.

20120921 Gold Legacy COT LCNS

The combined commercial traders held a net short position of 249,633 lots on the COMEX as of September 18, the largest combined commercial net short position for gold futures since August 2, 2011 (287,634 lots net short then with $1,659 gold).  Gold would peak five weeks and $266 later in September near $1,923, but not before the combined commercial traders had reduced their collective net short hedges by more than 59,000 contracts in a rare, but dramatic short covering retreat (to 227,714 contracts net short on September 6, 2011).

While we are at it, there was similar activity in the COMEX futures for silver.  Just below is the graph for the Producer/Merchants for silver futures short positions, showing a huge 12,618-lot (19.6%) reduction in PM short positions, to show 51,855 lots short.

20120921 Silver PM shorts

Meanwhile, traders the CFTC classes as Swap Dealers, the mercenary banks and firms that sell swaps in other markets and then hedge those derivatives using futures, reported a similarly large 11,681-lot (117%) increase in their pure short positions to show 21,650 contracts short - the highest number of Swap Dealer short bets since March 19, 2011 (21,914 then with $43.94 silver).  Below is a chart of just the Swap Dealer short positioning for reference. 

20120921 Silver SD shorts

Interestingly, just since June 26, the Swap Dealers have gone from being record net long to their largest net short positioning since February 22, 2011.  On June 26 the SDs were net long 19,681 contracts.  By Tuesday, September 18, they reported 7,875 lots net short.    Below is a graph of the Swap Dealer net positioning in COMEX silver futures. 

20120921 Silver SD net

In the words of Sammy Wright, "there's something funny going on."     

More later this weekend for subscribers. 


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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.

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