"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, December 2, 2013

Commitment of Traders out today

Due to the Thanksgiving Holiday last week, the usual Friday release of the Commitment of Traders report from the CFTC was delayed until today, Monday.

Here are a couple of charts noting the latest data through Tuesday of LAST WEEK. It is a shame that we cannot get the data as soon as each day is completed but alas, things are what they are. I am especially interested in seeing whether or not the hedge fund category has gotten a bit more aggressive on their long liquidation than they did last week.

Notice that their reduction of longs was relatively modest by recent comparison but that they were quite aggressive in playing the short side of the gold market. See the huge spike upward in the red line?

Something else caught my interest. Notice the Commercial category ( Red line)which includes the Processer/User/Merchant(s). It is noted on the chart by the Ellipse. For the first time ever on this particular chart they are now NET LONG. That is a rather remarkable development. In and of itself, it does not mean all that much since it is speculative money flows that drive today's markets but it is noteworthy nonetheless. We'll watch this number as well as that of the Swap Dealers in subsequent reports to see if this new trend continues. My guess is that as gold moves lower and especially if it stays down near the cost of production for any significant length of time, we will see both Swap Dealers and this Commercial Category building more long side exposure to the gold market.

Based on the reported Deliveries so far this month at the Comex for the December gold contract, JP Morgan continues to be the largest stopper. Again, at the risk of overly repeating myself - it is speculators that drive markets, not commercials so the most important group to monitor will be these enormous hedge funds. While their overall net long position is very close to the same level is was earlier this summer when gold spiked to an $1180 low, they are still NET LONG this market and have not yet managed to move to an overall NET SHORT position.

In other words, strong physical buying of the metal MUST SURFACE almost immediately or these hedge funds are going to batter the metal even more as they are now following the lead of their computers and getting more aggressive towards the short side.


  1. "The short covering rallies seem ferocious when they occur, but their volume remains muted compared to the volume occurring within the direction of the trend, which is DOWN".

    All is said.
    I read a lot about Armstrong now, or other letter writers.
    Imho, the difference between an analyst or a letter writer and a trader, is that the trader is going to cut the 3 page bullshit and will be judged on a track record based on 3 small lines.
    You want to see the newsletter, trader style? Here we go :

    "Guys, we are the Xth december, and I'm going long NOW at X $ exactly, with a stop loss at Y $ exactly. My first target is Z $ exqctly, if we reach it, I will sell W % of my position."
    It's not very lyrical, but it's the way you can judge about successful trading or not.

    I don't care reading a 3 page long newsletter from someone who never tells you what his positions are!
    Btw, I hope together, we'll manage to write to each other some "trading style" newsletters regarding gold, especially on a medium-term investment point of view, i.e the central unit being the weekly time scale, the tactical unit being the daily time scale confirming the opportunity.
    On that time scale, we have plenty of room to exchange on this blog and warn each other about the possible opportunity.

    Now to me, the risk is unfortunately (because I'm holding physical not 100% hedged) down, and down big way if the daily close drops below 1220. I don't want to anticipate too much or predict, but in terms of probabilities, the more we get close to 1180, the more likely it is imho that we will break it. In june, we were 100 dollars under the monthly inf bollinger, and after a huge drop in the market. Not the case anymore. Market is more vulnerable than it was. The name of the game being to push it as much as possible down to make as much money as possible before reversing positions, I'm not optimistic. Last warning gold bugs who think you have too heavy position in gold, maybe hedge a little bit or sell a little bit in order not to panic like a mindless rabbit if gold hits sub 1000$ prices. It would be a total disaster for you if you sell at those levels.

  2. @Dan, thanks for all those comments, it's gold in itself.

    Chart1 : long contracts stable and shorts increasing : does it feel like the bears are launching all their forces in the battle to hit the critical levels of 1200 and 1180 and crach the market by hitting the stop losses underneath?

    Chart2 : commercial are long. Hedge Funds are still long...who the heck is short? Small specs only and big time?

    Have a nice day,

  3. Gold is a funny thing. When its going down, no one thinks they need it. When its going up, everyone knows they must have it. Central banks don't know if their currencies are stable because of the gold they own or for other reasons. But if they have sold a lot during this decline, and then their currencies decline, then they will know why.

  4. The lesson of silver is that its possible to go from an adult to a teenager in just a few years. So it should be possible in real life for a person to do the same. Someone should work on that. !!!!!!!!

  5. Thanks for the wise words Hubert.
    I started hedging by buying GLL and DUST late last year.
    They are not a buy and hold and I like to keep fairly tight stop losses.
    Sadly they have performed every time I bought them (only once did I lose small amount). I say sadly because gold's decline has been relentless.

    Yep, we very well could see sub 1000 on gold, I hope it happens quickly.
    The Miners?….the few survivors will probably be a smoking buy at some point.
    I will be watching your's and Dan's comments to try and determine when the market really starts to turn.
    You are right on Hubert, the pump and dump charlatan websites are places I no longer go to…this means this is one of the only ones that is worth reading.


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