Saturday, August 23, 2014

If a Precious Metals Squeeze Develops Look to Swap Dealer Gold Positions as a Cause

Elsewhere we mentioned that if a squeeze got underway it likely would not be because of the overly large short positions held by Swap Dealers in silver futures.  No, if a squeeze develops, it is more likely to be caused by the Swap Dealer positioning in gold futures. Consider the data table below as “Exhibit A”. 

20140823 SD Data Table Gold

Notice that the SD net short position peaked July 8 at 108,268 contracts net short.  Notice also, that with gold now about $30 cheaper, and even after 11,752 contracts were covered Tues/Tues, the SD net short position remains at an extremely high 93,559 contracts net short. 

Here’s how it looks in the more familiar graph form.

20140823 SD Net Gold

(The lower the blue line the larger the net short position in this graph.  CFTC, Cash Market, GGR.)

And here’s how it “got there” – the gross shorts which remain at nosebleed levels, currently 151,772 lots.  That’s down from the July 22 peak of 167,723 contracts, after giving effect to the 6,676 covered this COT week, but not enough to take much of the pressure off.   Here’s the gross shorts graph for reference.

20140823 SD Shorts Gold

(The higher the blue line the larger the gross short position in this graph.  CFTC, Cash Market, GGR.)

No, if a squeeze develops, we won’t be blaming the silver futures market this time.  We will be pointing instead at the gold futures market where significant imbalances still show. 

Vik small(And to the hecklers out there, especially the ones from Germany who seem to have tons of time and little else to do besides pester blog writers with mind numbingly long emails, yes, we know that squeezes are rare, but they are not nonexistent – the last good one being in 2010-2011 for example.  Talk to the hand, sport.  You might get a better response there.)



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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