gunDriller
11th July 2010, 03:50 PM
http://www.gotgoldreport.com/20100710COTflashPDF.pdf
I pasted part of it below.
If you were to summarize his report ... what would you say ? I tried to read it, but it's not sinking in. It seems like he knows his stuff.
– We came fairly close to reentering the gold trade with our short-term ammo this past week. We actually had several limit orders cued up not all that far from the trading on Wednesday. The idea at the time was simple. We were looking for the “second wave down†which so often occurs in aggressive gold market sell downs. Our initial “feeler†orders would have kicked in had gold been driven down another $25 or so. That was with gold probing the $1,180s.
Unfortunately (or fortunately for those already long), we counted a bit too much on past gold sell-down history this time only to see slightly more buying interest than selling with gold in the $1,180s. Gold hasn’t continued lower, yet, but it also hasn’t snapped back up to where it started in the $1,250s either.
We did look briefly at some long option ideas also, but the premiums seemed extra rich at the time, so we stuck to the original game plan of waiting for gold to come into our expected support zone, preferring to wait to see what the commitments of traders report would show us before refining our expected support targets. We will get to that in just a moment.
The net result is that we remain on the sidelines with our short-term gold-silver ammunition, but, as always, we remain thankful we hold physical metal in our longer-term arsenal.
With no further introduction, let’s get right into this week’s report.
Gold COT
The Commodities Futures Trading Commission (CFTC) issued its weekly commitments of traders (COT) report at 15:30 ET yesterday, Friday, July 9, 2010. The report is for the close of trading as of Tuesday, July 6. (Please note, this report is being filed Saturday, July 10, but due to technical issues it may not be sent to subscribers until Sunday.)
Remember that GotGoldReport.com is focused on the changes in positioning of the largest futures traders in that report – the traders the CFTC classes as “commercial,†including the bullion banks, large dealers and Swap Dealers combined. We refer to those commercial traders as “LCs†for “Large Commercials.â€
As gold fell sharply $47.90 or 3.9% to $1,192.60 COT reporting Tues/Tues, COMEX commercial traders decreased their combined collective net short
positioning (LCNS) by a stunning 40,814 contracts or 14.1% from 289,956 to 249,142 contracts net short as the open interest fell by a smaller 23,406 contracts (3.9%) from a near record 601,138 to a still very high 577,732 contracts open.
This week’s reduction in the large commercial net short positioning (LCNS) is the largest nominal one-week LCNS reduction since August 12, 2008, when the LCNS then fell 43,104 contracts with gold then in the $813 arena. It is also the fifth largest one-week nominal reduction in our records going back to 2003.
The largest one-week nominal LCNS reduction in our records occurred with the August 30, 2005 COT report as the LCs then covered or offset an enormous 54,224 contracts with gold then in the $430s.
Here's the nominal LCNS graph for gold futures (COT Graph1):
Source for data CFTC for COT, cash market for gold
We think it is interesting to point out that this week’s fifth largest LCNS reduction in nominal terms was “only†14.1% of the entire large commercial net short position. That 14.1% reduction is large, but there have been quite a few larger drops in the LCNS in percentage terms since 2005.
For just a couple of examples, consider the COT report from July 31, 2007. As gold fell $17.60 or 2.6% from $683.20 to $665.60 that COT week, the LCNS plunged 48,958 contracts from 161,602 to 112,644 contracts net short. That was an LCNS reduction of 30.3% in one week.
Looking farther back into the data, in the COT report for January 11, 2005, as gold fell $5.16 or 1.2% from $427.08 to $421.92, the LCNS declined 35,405 contracts from 105,742 to 70,337 contracts net short – a reduction then of 33.5%.
The point is that this was a large drop in the LCNS, but certainly nowhere near a record drop in percentage terms.
We compare the nominal gold LCNS to the total open interest. That gives us a better idea of the relative positioning of the largest hedgers and short sellers – the Producer/Merchants and the Swap Dealers combined into a single category - on the COMEX.
Notice, please, that the LCNS dropped a good deal more than the open interest. When we see that it suggests that the largest “paper gold†sellers are aggressively closing out their “hedging.†When compared to all contracts open, the relative combined commercial net short positioning (LCNS:TO - the most important graph we track) fell sharply from 48.2% to 43.1% of all COMEX contracts open.
Here's the LCNS:TO graph for gold (COT Graph 2):
Source for data CFTC for COT, cash market for gold
As gold sold down from the $1,260s to just the $1,180s, we have to note that the LCNS:TO has fallen to its low of the year. Indeed we have to go all the way back to January 20, 2009 (immediately following the 2008 panic) to find an LCNS:TO lower than this week.
We view the current LCNS:TO of 43.1% as arguing more bullish than bearish. With gold in the $1,190s the largest commercial traders, as a group, seemed to have been in a rush to cover or offset their net short positioning so far in this July sell-down.
Consider that as all COMEX traders, long and short, closed out 23,406 contracts of paper gold “action†the largest sellers of futures contracts reduced their net short bets by 40,814 contracts, 1.7 times (or 74% more than) the drop in open interest. That certainly sounds to us like a rush to the exits for paper gold short sellers.
Producer/Merchant… Commercials Strongly Reduce Gold Short Positions
The Producer/Merchant commercials (PMs), the category in which we believe the largest bullion banks “live,†reported an all time high net short position of 223,009 contracts in the June 22 COT report. In the two reporting weeks since then as gold fell roughly $50 from the $1,240s to the $1,190s the PMs have covered or offset 42,768 contracts or 19% of that position to show a still high but much lower 180,241 contracts net short.
The PMs reduced their net short positions by 27,974 contracts in this reporting week alone.
Just below is the Producer/Merchant (PM) positioning graph as of Tuesday, from the disaggregated COT data (COT Graph 3).
Source CFTC for disaggregated trader data, Cash Market for gold
Remember that the blue line in the graph above is expressed as a negative number, so when the commercial net short position rises, the blue line falls and vice versa."
I pasted part of it below.
If you were to summarize his report ... what would you say ? I tried to read it, but it's not sinking in. It seems like he knows his stuff.
– We came fairly close to reentering the gold trade with our short-term ammo this past week. We actually had several limit orders cued up not all that far from the trading on Wednesday. The idea at the time was simple. We were looking for the “second wave down†which so often occurs in aggressive gold market sell downs. Our initial “feeler†orders would have kicked in had gold been driven down another $25 or so. That was with gold probing the $1,180s.
Unfortunately (or fortunately for those already long), we counted a bit too much on past gold sell-down history this time only to see slightly more buying interest than selling with gold in the $1,180s. Gold hasn’t continued lower, yet, but it also hasn’t snapped back up to where it started in the $1,250s either.
We did look briefly at some long option ideas also, but the premiums seemed extra rich at the time, so we stuck to the original game plan of waiting for gold to come into our expected support zone, preferring to wait to see what the commitments of traders report would show us before refining our expected support targets. We will get to that in just a moment.
The net result is that we remain on the sidelines with our short-term gold-silver ammunition, but, as always, we remain thankful we hold physical metal in our longer-term arsenal.
With no further introduction, let’s get right into this week’s report.
Gold COT
The Commodities Futures Trading Commission (CFTC) issued its weekly commitments of traders (COT) report at 15:30 ET yesterday, Friday, July 9, 2010. The report is for the close of trading as of Tuesday, July 6. (Please note, this report is being filed Saturday, July 10, but due to technical issues it may not be sent to subscribers until Sunday.)
Remember that GotGoldReport.com is focused on the changes in positioning of the largest futures traders in that report – the traders the CFTC classes as “commercial,†including the bullion banks, large dealers and Swap Dealers combined. We refer to those commercial traders as “LCs†for “Large Commercials.â€
As gold fell sharply $47.90 or 3.9% to $1,192.60 COT reporting Tues/Tues, COMEX commercial traders decreased their combined collective net short
positioning (LCNS) by a stunning 40,814 contracts or 14.1% from 289,956 to 249,142 contracts net short as the open interest fell by a smaller 23,406 contracts (3.9%) from a near record 601,138 to a still very high 577,732 contracts open.
This week’s reduction in the large commercial net short positioning (LCNS) is the largest nominal one-week LCNS reduction since August 12, 2008, when the LCNS then fell 43,104 contracts with gold then in the $813 arena. It is also the fifth largest one-week nominal reduction in our records going back to 2003.
The largest one-week nominal LCNS reduction in our records occurred with the August 30, 2005 COT report as the LCs then covered or offset an enormous 54,224 contracts with gold then in the $430s.
Here's the nominal LCNS graph for gold futures (COT Graph1):
Source for data CFTC for COT, cash market for gold
We think it is interesting to point out that this week’s fifth largest LCNS reduction in nominal terms was “only†14.1% of the entire large commercial net short position. That 14.1% reduction is large, but there have been quite a few larger drops in the LCNS in percentage terms since 2005.
For just a couple of examples, consider the COT report from July 31, 2007. As gold fell $17.60 or 2.6% from $683.20 to $665.60 that COT week, the LCNS plunged 48,958 contracts from 161,602 to 112,644 contracts net short. That was an LCNS reduction of 30.3% in one week.
Looking farther back into the data, in the COT report for January 11, 2005, as gold fell $5.16 or 1.2% from $427.08 to $421.92, the LCNS declined 35,405 contracts from 105,742 to 70,337 contracts net short – a reduction then of 33.5%.
The point is that this was a large drop in the LCNS, but certainly nowhere near a record drop in percentage terms.
We compare the nominal gold LCNS to the total open interest. That gives us a better idea of the relative positioning of the largest hedgers and short sellers – the Producer/Merchants and the Swap Dealers combined into a single category - on the COMEX.
Notice, please, that the LCNS dropped a good deal more than the open interest. When we see that it suggests that the largest “paper gold†sellers are aggressively closing out their “hedging.†When compared to all contracts open, the relative combined commercial net short positioning (LCNS:TO - the most important graph we track) fell sharply from 48.2% to 43.1% of all COMEX contracts open.
Here's the LCNS:TO graph for gold (COT Graph 2):
Source for data CFTC for COT, cash market for gold
As gold sold down from the $1,260s to just the $1,180s, we have to note that the LCNS:TO has fallen to its low of the year. Indeed we have to go all the way back to January 20, 2009 (immediately following the 2008 panic) to find an LCNS:TO lower than this week.
We view the current LCNS:TO of 43.1% as arguing more bullish than bearish. With gold in the $1,190s the largest commercial traders, as a group, seemed to have been in a rush to cover or offset their net short positioning so far in this July sell-down.
Consider that as all COMEX traders, long and short, closed out 23,406 contracts of paper gold “action†the largest sellers of futures contracts reduced their net short bets by 40,814 contracts, 1.7 times (or 74% more than) the drop in open interest. That certainly sounds to us like a rush to the exits for paper gold short sellers.
Producer/Merchant… Commercials Strongly Reduce Gold Short Positions
The Producer/Merchant commercials (PMs), the category in which we believe the largest bullion banks “live,†reported an all time high net short position of 223,009 contracts in the June 22 COT report. In the two reporting weeks since then as gold fell roughly $50 from the $1,240s to the $1,190s the PMs have covered or offset 42,768 contracts or 19% of that position to show a still high but much lower 180,241 contracts net short.
The PMs reduced their net short positions by 27,974 contracts in this reporting week alone.
Just below is the Producer/Merchant (PM) positioning graph as of Tuesday, from the disaggregated COT data (COT Graph 3).
Source CFTC for disaggregated trader data, Cash Market for gold
Remember that the blue line in the graph above is expressed as a negative number, so when the commercial net short position rises, the blue line falls and vice versa."