Friday, May 31, 2013

Gold and Silver Disaggregated COT Report (DCOT) for May 31

Edit 1:  Adds charts and brief commentary. 

This week also shows the Commercial category in the Legacy COT report.

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.  This week we are also adding in the net positioning of traders the CFTC classes as “Commercial” in the Legacy COT report. 

Note the extremely large changes for the Swap Dealer commercial traders and the Other Reportable traders, which are very possibly directly related. 

20130531 DCOT


(DCOT Table for May 31, and Legacy COT commercial positioning for data as of the close on Tuesday, May 28.   Source CFTC for COT data, Cash Market for gold and silver.)  (More...)



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.

We also focus on the Legacy COT positioning of traders deemed “Commercial” by the CFTC, which includes Producers, Merchants, Processors and Users, plus Swap Dealers in a single category.  The Legacy COT report preceded the Disaggregated COT report and we have tracked and charted it for many years, focusing on the movement and positioning of commercial traders – The “Big Hedgers.”   

Consider the graph below showing the Legacy COT positioning of the traders the CFTC classes as "commercial," the largest bullion dealers, refiners, processors, users and the bullion banks many of those traders end up trading through.  

20130531 LCNS Gold

The way to look at this graph is that the blue line measures the desire of the commercial traders to hedge against a falling price of gold.  The higher the blue line the more motivated the Big Hedgers are to hedge their gold bullion exposure (or bet that gold prices will fall).  The lower the blue line the less motivated to hedge (or bet that gold prices will fall).  As of May 28, with gold then $1,380.94, the commercial traders held just 59,221 contracts net short gold.

We have to go all the way back to May 31, 2005 (8 years exactly) to find a lower net hedge position for commercial gold futures traders.   On the last day of May in 2005 the commercials reported holding just 52,996 contracts net short with gold then $417.  

20130531 LCNS Gold 2005 Date

Commercial traders are very obviously not very motivated to hedge gold in the $1,380 neighborhood. 

Perhaps the most stunning of the changes in the disaggregated commitments of traders report (DCOT) was the extremely large reduction in the net long positioning of the traders the CFTC classes as Other Reportables - very large traders who trade gold futures for their own book, as opposed to trading for clients. 

20130531 Other Reportables Gold Net

The Other Reportable traders reported a reduction of a whopping 34,059 contracts (77.6%) of their net long positioning, from 43,901 to 9,842 contracts net long (in just one week).  Just since March 26 (9 reporting weeks) the Other Reportable traders have reduced their collective net longs in gold futures by 66,669 contracts (87%) from a DCOT record high 76,511 to 9,842 contracts net long. 

We are reminded of the similar Other Reportable exodus which occurred in early 2011, which shows clearly on the graph above.  Curiously, the previous Other Reportable net long exodus occurred just prior to the largest and most important rally for gold since 1980.   

There were other, important changes in the positioning of the largest traders of gold futures in the disaggregated  COT report, which we will speak to in our chart updates later this weekend.

Subsequent to the Tuesday COT cutoff, the open interest for gold futures plummeted even further, to 383,791 contracts as of Thursday's close (another 27,210 contracts).  Just since last Thursday the open interest for gold futures has fallen by 61,726 lots or 13.9%, from 445,517 to 383,791 contracts open.

A very large numberof the contracts which were open in last week's COT report did not make the "roll" to August futures in other words. Suffice it to say there have been extraordinarily large and unusual changes in the positioning of the largest traders of gold futures as the June contract expired.  

We will have much more in our review for GGR subscribers this weekend, probably on Sunday, Monday at the latest.  

That is all for now, carry on. 

 

 


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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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