Open interest (futures & options) watch for gold silver

[swissaustrian]

Sorry swissaustrian,
as I think you are gonna see one more major dip on Monday. This will start Sunday night. For what ever reason the stock futures will get Hammered before the open on Monday (Thats why they goosed the market today) (You would think the opposite would happen market down metals up. But we are dealing with criminal intent here and they have conditioned the masses that when the market deflates so do the metals. You know the old saying ? (Tell or telegraph a lie long enough and the masses will begin to believe it) Precious metals will take one more "MONSTER" plunge before the options expiry at the close of the market on Monday. Then Tuesday I still think you will see some pressure because that will be notice day (notice from the option holder that they elect to exersise the option and take physical delivery) The key for the Comex is to stop people from taking physical delivery. (I know the Comex does not settle in metal, but in cash. It's the psyc that counts) Then on Wednesday I see a start of a rebound. This whole paper market is a scam and I really think people are starting to see it. Buy half over the weekend, and half after Tueday would be my recommendation "Spread the Love" so you don't get smoked by the pressman in control of the printing press.

Good luck and thanks for the data ! :wave:

I respect your opinion, but let me provide you the link to the gold op/ex thread: http://www.pmbug.com/forum/f2/options-expiry-manipulation-gold-price-one-chart-229/
As you can see there, op/ex manipulations are usually finished before the day of the expiry. Historically, price management has been undertaken during the 5 prior trading days. I don't think that it's gonna be different this time. High Volatility at op/ex days is dangerous because it might trigger panic liquidations or short squeezes which both lead to higher costs of price manipulations. Additionally, op/ex days usually have high trading volumes, requiring a larger number of contracts to move prices. Mild volatility is therefore the cheapest way to achieve pre-managed prices at op/ex.

We could very well see a stock market plunge on Monday. The UK just got downgraded by Moody's. That has strenghtened the dollar afterhours. I don't think that it's going to rock markets like the US downgrade did, though.

 

[stockjockee]

I respect your opinion, but let me provide you the link to the gold op/ex thread: http://www.pmbug.com/forum/f2/options-expiry-manipulation-gold-price-one-chart-229/
As you can see there, op/ex manipulations are usually finished before the day of the expiry. Historically, price management has been undertaken during the 5 prior trading days. I don't think that it's gonna be different this time. High Volatility at op/ex days is dangerous because it might trigger panic liquidations or short squeezes which both lead to higher costs of price manipulations. Additionally, op/ex days usually have high trading volumes, requiring a larger number of contracts to move prices. Mild volatility is therefore the cheapest way to achieve pre-managed prices at op/ex.

We could very well see a stock market plunge on Monday. The UK just got downgraded by Moody's. That has strenghtened the dollar afterhours. I don't think that it's going to rock markets like the US downgrade did, though.

Good calls mate ! The metals held up well :wave:

 

[rblong2us]

Good calls mate ! The metals held up well :wave:

held up even better in £sterling terms ffftt:

 

[swissaustrian]

Eric King: “Jim, there are a great many pieces discussing the COT report, can you talk about that?”

Jim Sinclair: “I’m just going to ask you a question and give you a definitive answer: The question is, do you really believe the people (banks) who manipulated LIBOR are absolutely, totally, and completely honest on the figures that they render to the CFTC on the position of traders (COT)? The answer is, of course not....
Everybody in the trading industry, even those who should know otherwise, puts so much faith in looking at what they think is the commercials’ confessional. They believe they can read, through the COT, the commercials’ intentions. That’s just total nonsense. We’re living in a new normal, and one part of the new normal is that fabrication is a virtue.”

http://kingworldnews.com/kingworldn..._Gold_Will_Now_Be_Released_To_The_Upside.html

 

[pmbug]

 

[swissaustrian]

The new COT as of Tuesday is out. Gold was above 1600 and silver above 29 back then. The selloff since Wednesday has probably flushed out some more longs.

First gold: Speculators covered some shorts and increased their net long positions by a whopping 20%. They're still at very low net long levels, though. Commercials have increased their net short position a bit, but are still at historical lows. Open interest finally fell by 2.4%. Overall, the data for gold hasn't really changed much. It's still a fantastic setup for a rally.

Now silver: Speculators have really been flushed out of the market, rducing their net long position by 33%. We're now close to a speculator positioning that has historically indicated a bottom, see here eg last Summer: http://www.pmbug.com/forum/f13/open-interest-futures-options-watch-gold-silver-679/#post9099 . A little more liquidation would be required to create the perfect setup. It may already have happened this week from Wednesday to today. Addtionally, sit seems like there's heavy shorting going on in the over the counter market (otc) as indicated by the massive increase in the net long position of the swap dealers. That is a contrary bullish sign. Open interest also finally fell by 6.7%. It's still pretty high, though.

 

[benjamen]

http://www.321gold.com/editorials/schoon/schoon030613.html

Basically, these guys think the bullion banks are going to manipulate prices down far enough to unwind their short positions and go long before allowing the prices to go back.

 

[swissaustrian]

Might happen, but I think they're already out of gold.
With regards to silver, I think there might be no way out, see here: http://www.pmbug.com/forum/f13/open...s-watch-gold-silver-679/index2.html#post18836

 

[swissaustrian]

Gene Arensberg has put out another of his MUST READ reports out for free. It shows you how extreme the current paper positioning is:
http://treo.typepad.com/files/20130303-ggr-cot-notes.pdf

 

[swissaustrian]

The new data is out as of last Tuesday. As expected positioning in both gold and silver has gotten even more contrary bullish:

Gold: The commercials of reduced their net short positions a bit, though swap dealers (as part of the commercials) are more short than they were a week ago. Probably their counterparities in the otc market began to cover shorts.
Speculators once again reduced their net long positions by 20% and are now at levels not seen since the 2008 crash. Open interest stayed flat.

Silver: Mild commercial short covering indicates that the hedgers are still reluctant to close too many shorts. There still some way to go before we're at commercial net short positions which are similar to previous bottoms. Speculators, however, have finally reached the bottom zone in their net long positioning reducing their net long position by 40%, although there might be additional room for a lower net long position. Open interest stayed relatively flat, too.

Summary: Paper positioning is as contrary bullish as it can get. Once we break above 1600 / 30, the race to cover shorts should create serious fireworks.

 

[pmbug]

I love a good fireworks show.

 

[swissaustrian]

Visualization of the current COT data:

Charts by Adam Hamilton (http://www.silverdoctors.com/contrarian-gold-futures-bearish-sentiment-peaking/)

 

[swissaustrian]

Rumors are that bullion banks are buying during the London session:

Recent upside in spot gold has been attributed to renewed buying by CME names.

http://ransquawk.com/headlines/spot...ve-also-moved-to-print-fresh-highs-13-03-2013

 

[swissaustrian]

The new COT is out. I'm keeping it brief today:

Gold: While producers and merchants lowered their net short position again, swap dealers advanced heavily to the short side. This probably reflects some fresh longs by their counterparties in the otc markets (good sign). Speculators cautiously increased their net long position. Nothing special though. Open interest grew a bit.

Silver: The commercials are standing at an unchanged position that still has some space to the downside. Silver's underperformance compared to gold this week is consistent with this observation. Speculators reduced their net long position once again while prices stayed flat. That's a good sign. Open interest was flat.

Summary: The outlook hasn't changed and prices haven't either. We have massive short covering rally fuel. I guess we need to break out above 1600 for gold and then drag silver with it in order to cause massive short covering. 1600 has been tested three times this week and encountered selling each time. I'm confident that it could be different next week.

 

[swissaustrian]

 

[swissaustrian]

The trend in paper positioning for gold has turned together with prices.
Commercials increased their net short position, especially the Swap dealers.
Speculators furiously covered shorts, but there's much more work to do. Open interest fell, an indication for the closure of hedges by long term longs.

The story for silver is different: Not only didn't prices rise, Commercials reduced their net short position a bit. The producers/merchants still aren't willing to cover shorts. That's not a good sign. Speculators cut their net long positions again, probably by adding shorts without selling off longs, ie it's just hedging. The rising open interest confirms that assumption.

Summary: The diverging moves between gold (up) and silver (flat) are reflected in the changes in paper positioning. As always, the data is as of last Tuesday. Silver positioning of the producers/merchants still suggests that more pain might be ahead, maybe a spike into the 26 area.

 

[MasterQ]

Well 26 has amazing support so if you got the dry powder.

I'm seriously hoping the 28's hold and shake out the shorts lol!

-Q

 

[swissaustrian]

New COT data as of March 26th: Quite a lot of action.

Gold: Commercials reduced their net short position by 5%. They're still at ver low levels, ie they don't feel like hedging. Speculative longs were flushed out once again. There's still massive short covering rally fuel under this market. Open interest is down a lot. That's a nice sign, too.

Silver: Producers / Merchant are once again refusing to reduce shorts significantly. They seem to be betting on a spike low below 28. Speculators are not giving up, but are reducing their net long position to just 1075 contracts which is ultra low. The stable open interest suggests that speculative longs were not liquidated, but rather hedged with corresponding shorts. That means rally fuel once we turn arround.
Chart: Speculative net long silver position at historically low levels, ie contrary bullish

 

[swissaustrian]

The last two weeks, I've been warning of a spike low to 26 risk in silver and this week we got it .

I've also been talking about the reluctance of commercials to cover shorts in silver. It finally started this week. The data below is as of Tuesday, before the final push down on Wednesday below 27 and today's spike higher on the NFP disappointment. My guess is that commercial short covering in silver has gone on and resistance from them is now less. There still might be some more volatile sidewards trading between 26 and 28 required to cover additional commercial shorts before we can really turn arround.

First Gold: Commercials reduced their net short postion by about 10% while speculators reduced their net long postion by 20%. The setup for a short covering rally is getting better and better. When (not: if) it gets going, the speed of the upmove is gonna be breathtaking. Paper postioning suggests that it is going to more violent than even last summer which was quite a quick move after we finally broke out.

Silver: As I said above, producer/merchants as part of the commercials have finally started to reduce their net short postion by 15%. That's a good start, but we need more. We may have already gotten it after Tuesday. Especially the aggressive dip buying at 26.8 looked like short covering to me. Even more important is the fact that speculators are now net SHORT silver. This a very rare event. It didn't even occur during the 2008 panic. Once silver turns arround, the fireworks are gonna be epic Add on to that (as I already said). The final spike into the 26 area is not part of the data. Speculators have propably even expanded their short postioning after Tuesday.

Here's Gene Arensberg's (GotGoldReport) take with additional charts:

Note: Spec Funds (Managed Money) have become net short silver futures as of this report. Note also the extremely low net short positioning of the Producer/Merchants for gold. The Producer Merchants, the category which includes bullion banks, have not had so few bets that gold would fall in price since the 2008 panic. That is the same thing as saying that the large commercial traders are currently the least fearful that gold prices will fall further since December 9, 2008, when they then held just 80,669 contracts net short with gold then near $776 the ounce.

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.

If there is one particular chart of the many we review each week that we might want to call attention to, it would have to be the chart below - the gross short positioning of traders classed by the CFTC as Managed Money, aka the Spec Funds.

Because of that extremely high Managed Money silver short position, collectively the Spec Funds showed their largest ever net short, repeat net short position for silver futures since the inception of the CFTC disaggregated commitments of traders reports (data begins in 2006). As of April 2, with silver then showing a last trade of $27.26, Managed Money traders reported a net short position of 2,497 lots as shown in the chart below.

Managed Money traders have been net short silver futures before, for one reporting week on September 4, 2007, when they reported being 92 contracts net short with silver then changing hands at $12.09 an ounce. Two months later, silver had tested $15. Six months later, in March of 2008 silver had cleared $20 - just before the 2008 panic took control of the markets.


Perhaps as a "runner up" we might point to the chart below as important and noteworthy - the gross short positioning of Managed Money traders in gold futures as of Tuesday.

The Managed Money short positioning charts for gold and silver have something very much in common, in terms of what they represent.

Much more for subscribers in the chart updates this weekend.

http://www.gotgoldreport.com/2013/04/gold-and-silver-disaggregated-cot-report-dcot-for-april-5.html

 

[pmbug]

So the sale is gonna end soon?

 

[ancona]

Epic as always SA. Thank you.

I look forward to Harvey Organ on Saturdays when I can see the carnage.

 

[swissaustrian]

So the sale is gonna end soon?

TFmetals' take:

... so we turn to the silver commercials. The gross long position which, as a reminder has almost always fluctuated between 30,000 and 40,000 for as long as I can recall, grew again this week. For the reporting period, the Comm gross long position grew by another 2,300 contracts to a record 57,847. As of last night, it may have reached to near 60,000. All of the Spec selling allowed JPM et al to cover some more of their naked shorts. This week they covered another 3200, bringing their total position down to 76,350. Most importantly, the Silver Cartel net short ratio has fallen to 1.32:1. This is the lowest I've ever seen, exceeding the low of 1.34:1 on 12/27/11. That record low marked a bottom and silver proceeded to rally from $26 to $37 in nine weeks.

I SIMPLY CANNOT STRESS ENOUGH HOW EXTRAORDINARILY BULLISH THIS COT REPORT IS. We are clearly on the cusp of a major rally. Did it begin today? Maybe. Will it begin next week or the following week? Perhaps. All I know is that it will begin...and soon. Be ready.

http://www.tfmetalsreport.com/blog/4623/saturday-gold

The rally might have begun on Friday, maybe we're gonna trade sidewards for a few weeks. I don't know. But when pms get going, the rally is gonna be ultra violent due to the record high speculative short positions. I'm also totally convinced that the important support levels at 1526/26.0 are going to hold. BTFD!

-----

For the paper traders here at pmbug:
If you wanna make a hedged bet on the massive rally ahead, you can open a spread trade with a long bias. Buy July calls and July puts with a 2:1 call/put ratio, as described here:
http://www.pmbug.com/forum/f3/how-trade-silver-volatility-using-options-343/#post2409

 

[ancona]

Take a look at Harvey Organs site. It looks like someone is holding on no matter what. Silver shorts are nearly equal to long positions, something I think I've never seen. I have a feeling like the market is being set up, but for what, I don't know. If this is the doing of a government agency, they certainly are keeping deep under cover. If this is private hands, then I would suspect one of the deep pockets crowd who publicly derides the barbarous relic gold and his little whore stepsister silver.

Either way, I believe we'll see in the next week or so.

 

[swissaustrian]

80% Chance Of 40% Silver Short Squeeze

In the last 20 years, Silver shorts (in Silver futures, based on the Commitment of Traders data) has only been as high as it is currently for five periods. Four of those five periods were followed by considerable rallies in silver prices. The one period where prices flatlined (fell modestly) was a slow and steady rise in shorts (as opposed to the spike-like move currently). Of course, with near record amounts on the short side of the boat, it would seem clear where Silver should go next but this time is different we will be told.

Jul 1997: +70% rise over 29 weeks,
Nov 2000: -13.5% in 53 weeks,
Oct 2002: +13.2% in 12 weeks,
Apr 2003 +19% in 24 weeks,
Aug 2005 +114% in 37 weeks,

Average +40.5%

http://www.zerohedge.com/news/2013-04-08/80-chance-40-silver-short-squeeze

 

[pmbug]

I really need to stack some more this week.

 

[Jay]

no money. "SOB"

 

[swissaustrian]

Well, what a week. There's basicly no need to talk about the COT, because it is as of Friday and the game has completely changed as of today. The data below is completely useless. We have to wait until next Friday to know the impact of today's horror session:

 

[pmbug]

Today's COT report is out:

 

[swissaustrian]

To put it simply: That's not the COT we were looking for.

1. The herd, ie speculators, was right :flail: . They were record net short in both gold and silver last week and they made a fortune due to the crash. Then they decided to cover shorts at the bottom on Tuesday. Now they're net long at decent levels, not ultra long, but also not at such low levels that would cause a massive short squeeze once we get going to the upside. On the brighter side, it means that speculators are willing to bet on rising prices. However, should prices drop, the liquidation effect from speculators is gonna be more drastical. Overall, a riskier position than we would wish for.

2. The commercial hedgers, especially producers and merchants, didn't change their positioning a lot. They covered a bit in gold and raised their net short position in silver. They were obviously not convinced that the bottom is in on Tuesday. This reporting period covers the data until Tuesday when the bottom was put in overnight in Asia. Maybe commercials covered some shorts since then. If our analysis about the production costs of gold/silver is correct, then producers should be in the mood to cover once they think the bottom is in. Merchants should also have the intention to cover given the very credible reports about massive physical demand.

3. Next week's COT report will give us more data. We need to see commercial short covering. If they'd start building a short position, we'd be in trouble.

 

[pmbug]

Trader Dan's take:

...
When open interest readings increase, it tends to confuse some as it seems to contradict the usual pattern that has become so familiar. What is leading to confusion is that the SPREAD POSITIONS of some of the LARGEST TRADERS are not taken into account.

I have graphed two of these categories for you to see and noted the price action in gold that occurred over this same period. The two categories are the SWAP DEALERS and the OTHER LARGE REPORTABLES.

This latter category includes the likes of CTA's (Commodity Trading Advisors), CPO's (Commodity Pool Operators), Large Locals from off the Pit Floor and other Large Private Traders. While these groups do not have quite the same impact as the enormous Hedge Funds, they are still large enough to affect trading.

Can you see the big spike higher in their spread positions back in August 2011, when gold shot up to $1924 and then collapsed all the way to $1535 before it stabilized? Now look at this past week's spike higher. See a pattern here? By the way, the sharp increase in the number of spreads put on by the Large Reportables Camp ( 87,178) was the largest single week increase for that camp on record. The increase in the Swap Dealers' Spread position (+49,768) was also a weekly record.

There is your REASON for the SURGE IN OPEN INTEREST.

There is a strategy behind this which I will not get into right now in detail due to time constraints ( soon coming attraction) but suffice it to say for now that it is an attempt first to get downside protection and cushion losses for those who are long and are on the wrong side. Second - the proper use of a spread position can be very advantageous to traders who can time the markets accurately enough to leg into and leg out off these spreads. It requires considerable skill however to pull this off and trading accounts large enough in size to allow for the jump in margin requirements as one leg of the spread is lifted.

IF we leave off the impact of these spreads in the overall open interest numbers, it would have only seen an INCREASE of +14,460 compared to the previous week. This was based on the bullion banks increase of both their long and short positions (which incidentally favored more longs at this point than shorts) and an increase in the SHORT positions of the small specs, the general public who sold down into what might turn out to be a hole. When we take into account the sharp increase in the number of spreads, we see a completely different picture with open interest increasing over 154,000 contracts this week alone.

Therein lies the "mystery" for the open interest readings for the past week. If gold stabilizes here and begins to base build, watch for these spreads to be drawn down.

http://traderdannorcini.blogspot.com/2013/04/gold-commitment-of-traders-explains.html

 

[swissaustrian]

Spread trading = volatility trading
http://www.pmbug.com/forum/f3/how-trade-silver-volatility-using-options-343/

 

[swissaustrian]

I have to keep it brief today:

This week's COT is definitely looking better than last week's:

Gold: Commercials covered shorts aggressively into a rising market. It seems they don't think that there is a big chance for another crash. And why should they, they know gold trades close to production cost. Speculators actually reduced their net long postions. They're not convinced to cover shorts yet. We're climbing a wall of fear

Silver: The Picture is a Little different, because silver fell from Tuesday to Tuesday. Commercials didn't cover shorts that much. Speculators also didn't change positions to the extent they did in gold. Silver is still looking a little heavy.

Keep in mind: The data is as of Tuesday with gold at 1412 and silver below 23. Things might have changed quite a bit in the meantime.

 

[pmbug]

A brief summary - All classes of speculators, hedge funds, other large reportables, and the general public, were net sellers of gold this past reporting period.

The other side of the equation, the buying, was done by the commercial category (bullion banks, etc,) and the swap dealers. ...

More: http://traderdannorcini.blogspot.com/2013/04/notes-on-golds-commitment-of-traders.html

 

[swissaustrian]

 

[pmbug]

...
As shown below, on a month over month basis, US Bank & Large Trader long positioning has increased dramatically, with short positions being covered at the greatest rate of speed ever recorded:

...

Additionally, when looking at this trend from a “total-position” perspective, we see an even greater accumulated move being made on both the long and short sides. Short positioning by US Banks & Large Traders has been collapsing since the beginning of 2013, while long positions are being steadily accumulated:

...

http://bullmarketthinking.com/us-ba...hest-rate-on-record-short-positions-collapse/

Scorn if it pleases you, but know this. Gold is soon to become the friend of the market manipulators, and then the enemy of the dollar. ...

http://www.jsmineset.com/2013/06/11/outright-war-called-finance/

 

[swissaustrian]

Brief look at the recent COT as of last Tuesday:

Commercial hedging in gold is at very low levels, ie they're convinced that downside potential is very limited. Silver commercials are still reluctant to cover massively. Speculators in both metals are at low levels, but not at record lows.

 

[DSAbug]

SA.. This is the lowest short exposure the commercials have had since the bull market began!

 

[swissaustrian]

SA.. This is the lowest short exposure the commercials have had since the bull market began!

You're only talking about gold, right?

 

[swissaustrian]

BIG moves in the gold COT this week, while silver positioning barely changed :flail:

The gold producers and merchants seem to be totally confident that there is basicly no downside potential. They`re at just 4414 contracts net short and covered close to 10000 contracts in one week. This is certainly an all-time low short position by the producers and merchants.
Overall open interest (number of outstanding contracts) shrunk by 10% in one week, that`s a BIG move.

Just to put this into perspective, here is the positioning as of last Christmas (12-24-2012), seven months ago:

Positioning has drastically changed, but open interest stayed approximately the same.

 

[Unobtanium]

This is a rather good but long and detailed read. See link for charts and data. The conclusion:


August 11, 2013
COT –Other Reportables get the Willies, Dump 54% of Gold Shorts
http://treo.typepad.com/files/20130811-ggr-cot-notes.pdf

Brief Bottom Line:
“Look Martha, the bullion banks are way longer in gold than they were in 2008!”

Despite very large changes in the positioning of the Swap Dealers and Other Reportables, which we find incredibly interesting, but unreadable, there is still a tremendous amount of heavy short covering firepower now via the traders we least associate with the short side of gold, the traders the CFTC classes as Managed Money, Other Reportables and smaller Non-Reportables (although there are 37,000 less OR shorts as of this week).

Relying on the Legacy COT for our own guidance, the COT remains strongly contrary bullish. We do so with the understanding and experience that teaches us that the COT is an imperfect, but still very valuable tool to use, especially if trading as a contrarian in the futures markets.

Right or wrong, our read of the Legacy COT is that the largest, best funded and presumably the best informed traders of gold futures have positioned for higher, not lower gold prices.

The fact that U.S. bullion banks are now the most net long we have ever seen them is icing on the COT cake. That simply and certainly says bullion banks are the least fearful of a falling gold price since at least 2008 and probably in 2001, when gold was bottom scraping in the $270s.

The relative commercial net short position or LCNS.TO remains near historic lows despite a rather large one week jump this time. The Big Hedgers are not only not aggressive, they are predominantly net long!