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Old 11-30-2011, 01:07 PM   #1
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Exclamation Gold and silver COT reports show traders abandoning COMEX

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In gold futures and options, managed funds cut 21,697 long positions(or bets prices will rise) and added 679 short positions, beting prices will fall.

This reduced their net position by 13% to 149,256 long contracts, from 171,632 long contracts a week earlier.

The managed fund net long position represents around 14.9 million troy ounces of gold.

Any short term, speculative froth that was in the gold futures market as gold rose above $1,800 and then $1,900 has well and truly been diminished.

Total holdings of Comex gold futures and options are back at levels seen in 2009.

Quote :
The total gold comex open interest fell by a massive 12,293 contracts to 426,180 from yesterday's level of 438,474. With gold rising the only explanation that makes sense is the fact that longs refuse to play anymore due to the MF Global mess with the commingling of client funds with dealer funds. Customers refused to put up the entire purchase of gold and silver contracts fearing confiscation by the dealers. The CME is slowly seeing their business deteriorate. ...

The total silver comex also contracted by a large 5135 contracts to 99,053 compared to yesterday's reading of 104,191. This reading is very close to a multiple year lows in OI. I remember OI touching its all time lows of 90,000 when silver was around 4.00 per oz. However in those days we had considerable spread positions which is not present today. So you can probably speculate that we are in record low OI territory tonight. ...

I'm not quite sure what to make of this. The fact that prices have held or risen slightly while open interest has fallen dramatically would normally be a very bullish indicator, but if investors are abandoning the COMEX because MF Global taught them their chips can be stolen at any moment, it may have a chilling effect on the futures market.
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Old 11-30-2011, 01:20 PM   #2
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I´ve worked in the futures industry for 4 years (unitl late 2010) unitl I "retired", managing a futures fund (CTA). This loss of confidence in paper was my motivation to quit (besides having made enough money). I´ve recently talked to a friend of mine who still works in the industry. They´re totally scared by the MFG story. Futures were always considered to have virtually no counterparty risk. Now everybody has to learn the hard way that you can´t work under that premise any longer.

To make a long story short: It´s possible that the drop in OI has to do with the MFG story. Another explanation would be the anticipation of position limits combined with a transfer of positions to London (LBMA). A third one would be that Asian market participants transfer their positions to the new Asian exchanges. A fourth explanation would be that everybody who was in the market only for speculation left, because they´re all struggeling for liquidity. Only long term investors, hedgers, and people awaiting delivery stay. A fifth one, finally, that people just left the paper market for physical.
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Old 11-30-2011, 05:12 PM   #3
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Yup, the truest, yet least satisfying answer (to noobs) is often "it depends".
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