Bottom line: COMEX commercials strongly increase their short bets for both gold and silver, but less than we expected. Gold +1.5% and the gold LCNS increases 7.6%. Silver +1.5% and the silver LCNS increased by 7.2%. Details just below.
The SEC Paints a Nasty Picture
But is it really what it seems?
The Market was apparently shocked, … shocked! … to learn that Goldman Sachs is not “The Goldman Sachs Benevolent Association,” but is instead a predatory financial game-rigger that actually profits from favoring particular hedge funds over foreign institutional investors – at least according to the SEC.
Who knew? (With all due appropriate sarcasm.)
Yes, the same SEC that failed to catch Stanford and Madoff despite having them handed to the, uh, “regulator” on a silver platter by whistle blowers.
Sound familiar? We hate that the last statement disparages silver platters.
Everyone by now has learned about the high-profile SEC shootout with Goldman, so we won’t dig too deeply into that hole in this COT update. The knee-jerk reaction by the helium-filled Big Markets is understandable given the market’s recent levitation. What IS surprising, at least to us, was a similar sell-down on just about all the commodities we follow which are more or less unrelated to the financials.
Or are they? Gold, for example plunged over $20 (nearly 2%) in the span of half an hour largely on the notion that John Paulson’s family of funds are one of the largest investors in GLD, the largest gold ETF. Paulson & Company is connected to the SEC-Goldman news, but is not named in the SEC civil action.
Even more bizarre was a lightening-fast 70-cent (almost 4%) dive lower for silver futures on the COMEX immediately following the SEC’s strategically timed Friday-just-before-options-expiry salvo at Goldman. As we quickly write this, silver is trading in the low $17.70s having opened the day in the $18.40s.
The Big Markets have been looking for an excuse to sell off and so has the sell-side of the precious metals futures markets. Apparently today’s SEC news was just enough of a catalyst for that sell-down.
Another sell-first-ask-questions-later event?
Probably, but we won’t know for sure until the markets reopen Sunday evening and that’s not really what this update is about. This update is about the changes in COMEX commercial trader positioning just reported.
With no further tangential distractions then, let’s get to it.
Gold COT
The Commodities Futures Trading Commission (CFTC) issued its weekly commitments of traders (COT) report at 15:30 ET today, Friday, April 16, 2010. The report is for the close of trading as of Tuesday, April 13. GotGoldReport.com is focused on the changes in positioning of the largest futures traders in that report – the traders the CFTC classes as “commercial.” We refer to those commercial traders as “LCs” for “Large Commercials.”
For gold, as gold added $16.49 or 1.5% to $1,150.90 COT reporting Tues/Tues, COMEX commercial traders increased their combined collective net short positioning (LCNS) by a big 18,578 contracts or 7.6% from 244,906 to 263,484 contracts net short as the open interest rose a much larger 31,468 contracts from 497,388 to 528,856 open.
Remember that is as of the Tuesday close, well before today’s GS fireworks.
Here's the nominal LCNS graph for gold futures:
