Open interest (futures & options) watch for gold silver

swissaustrian

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This thread is dedicated to open interest (OI) in futures & options for gold and silver. The data is updated weekly by our "friends" at the CFTC.
Extremes (highs & lows) in open interest are useful to identify major lows and speculative manias in pms.

The data can be found here:

Gold

http://www.cftc.gov/oce/web/gold.htm

Commercial OI data for gold indicates massive hedging since the 2008 bottom and a quite impressive short covering during Q4 of 2011. You can also see that the largest commercial short position occured pretty simultaneously with the all time high of gold in September 2011.
I wonder if the massive increase in gold shorts since 2008 also has to do with the construction of GLD (and therefore isn't exactly "commercial hedging")? I've read about this a while ago. It seems like there's a short equivalent for every GLD share (I lack the time to search for an article now).



Non-commercial OI did not increase this much after 2008. There's also still some space until we reach speculative long levels again:


----------------------------------------------------------------

Silver
http://www.cftc.gov/oce/web/silver.htm

As you can see, it looks like we've had a major low in silver at the beginning of 2012. Commercial OI was nearly at 2008 panic lows:


Non-commercials have massively left the market after the crash in May 2011. That's great, because it
a) gives us upside potential if speculative "weak" hands enter the market again
b) limits downside potential, because there's less leverage in the market.



-------------------------------------------

Besides this:
One can also observe the stagnating (gold) / declining (silver) OI for the non-commercials during the last five years (since 2006) which means that speculators have NOT overtaken the futures and options markets. It's the commericials who are creating the volatility! In fact, that seems to confirm that only PHYSICAL demand is growing - besides the sheeple who are buying GLD and SLV.
 
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pmbug

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Nice. I used to read Harvey Organ's blog every day to keep up with this stuff. I started slacking off when I started doubting how the reports/system really has any bearing on reality. The silver doctors also do pretty good work highlighting bizarre discrepancies/movements in the COMEX reports. I haven't really been paying attention to the reports lately, so your post here is a welcome kick in the pants. Information, even if flawed, manipulated or deliberately misleading, empowers understanding.
 

swissaustrian

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Nice. I used to read Harvey Organ's blog every day to keep up with this stuff. I started slacking off when I started doubting how the reports/system really has any bearing on reality. The silver doctors also do pretty good work highlighting bizarre discrepancies/movements in the COMEX reports. I haven't really been paying attention to the reports lately, so your post here is a welcome kick in the pants. Information, even if flawed, manipulated or deliberately misleading, empowers understanding.
I think the threads you're linking to deal with a different subject :noevil:
They're about phyiscal inventory fraud, the numbers I'm talking about here in this thread only show the level of paper contracts (futures & options) at a certain point of time, the so called open interest ( http://en.wikipedia.org/wiki/Open_interest ) . All by themselves they don't give a hint about the level warehouse inventories. The paper (futures & options) to physical (warehouse inventory) ratios are fluctuating over time. So the COMEX isn't only a fractional reserve exchange, it's a partially backed exchange with fluctuating reserve ratios

Interactive charts about COMEX physical (registered) warehouse inventory can be found here:

Gold



Interactive:

http://www.24hgold.com/english/inte...e=COMEX WAREHOUSES REGISTERED&etfcodecom=GOLD


Silver (pretty impressive :silver: )



Interactive:

http://www.24hgold.com/english/inte...COMEX WAREHOUSES REGISTERED&etfcodecom=SILVER

Maybe you know how to embed the interactive charts here, I don't.
 

swissaustrian

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John Embry of Sprott AM is worried of an imminent raid in silver, because of the level of open interest:
When asked about silver specifically, Embry responded, “Silver is a more volatile version of gold, and once we get through this agony, silver will explode to the upside. It is worth noting that some people, looking at this amazing blowout in open interest, are very concerned there will be a raid in silver once again.
There could be an attempt to knock the price into the mid 20s before the next leg higher begins. That’s entirely possible. When you are dealing in a market that is this manipulated on the paper side, anything is possible. If that were to happen, it would be an even greater buying opportunity. I’m always nervous when I see massive blowouts in open interest because generally they are setting the market up to take it to the cleaners.”
 

swissaustrian

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Looking at the charts in the op:

Gold looks pretty bombed out, both on the commercial side (relatively small short position) as well as on the non-commercial side (very small long position and very low spread). These are indicators for a bottom.

Silver commercials haven't reduced their short positions as much as they did in December 2011, but their open interest is still relatively low.
Non-commercial open interest has basicly dropped to all time (late 2008 and late 2011) lows. Speculators have left the paper market. If some enter again, we might get some support for a silver rally.
 

ancona

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So.......as soon as they talk silver/gold down enough to crash out the price, the shorts buy and cover. This is their playbook and they are not going to change it.
 

swissaustrian

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cftc - managed money short positioning high for gold, silver
•could be 100 octane rally fuel for precious metals.
southeast texas – taking a break from the grueling, demanding and intense quest for things with fins and scales for a half day* today, we thought we would share with everyone a couple of the more interesting charts which surfaced in the latest commodity futures trading commission (cftc) commitments of traders report (cot). the report was released friday, may 18, with data as of tuesday, may 15.
according to the cftc, as of tuesday of last week, large traders the cftc classes as managed money (“mms,” hedge funds, commodity trading advisors and other funds that trade futures on behalf of others), increased their short positions in gold futures by 9,837 contracts to show 32,822 contracts short. That is the highest pure short position for the “funds” since september 16, 2008, during the height of the 2008 panic with gold then in the $770s. One week later, on september 23, gold closed at $891.90, about $122 higher as the mms covered or offset more than 20,000 of those short positions (not a misprint).



source for all graphs cftc for cot data, cash market for gold and silver.

very high pure short positions for the usually net long managed money traders very often correspond with important turning lows for gold. To confirm that notion simply look at the graph above and note that the spikes to the upside for the blue line (short positions) often correspond closely with bottoms in the pink price of gold.

the graph above is in part why we say that large mm short positions are “100-octane rally fuel” for the price of gold. the typically long side of the battlefield likely uses short positions to temporarily “hedge” existing long positions they do not wish to close. Their short positions are just like any other shorts, they have to be covered (bought back) at some point prior to expiry. Higher short positions are “buying pressure in a bottle” more or less.
remember that the positioning above was on tuesday with gold then trading in the $1,540s. Gold has indeed advanced since then and is currently trading in the $1,590 region as we write on monday, may 21, 2012.
that high short position is in part why the managed money no-spread net position shows the lowest net long positioning (80,098 contracts) since december 16 of 2008 (73,332 contracts net long then with $858 gold). On tuesday managed money traders were the least net long gold futures since the global panic of 2008 in other words.

so, to conclude this brief look at the managed money gold futures positioning, it’s pretty clear that “the funds” decided to “hedge” their long trades by adding shorts up to last tuesday. with gold moving back to the upside, we can expect with little doubt, that the mm’s pure short positioning will be considerably lower and their net long positioning will therefore be higher in the next cot report. the only question is by how much. That is, of course, unless gold does something weird by the close tomorrow, tuesday, the cutoff for the next cot report.

similar story for silver
turning to an interesting graph for silver futures, take a close look at the graph below and, given what we just shared about gold futures, answer the question: What does this high pure short positioning by the usually net long “funds” mean?



well, what it usually means is that silver is getting close to a bottom if history is any guide. to quantify the chart above, managed money reported an increase of about 3,700 new contracts short over the past two reporting weeks, to show a relatively high 12,518 lots short, with 3,334 contracts of that increase coming in the may 8 reporting week with silver then closing at $29.43.

that is actually the highest pure short positioning for the “funds” since the september 16, 2008 report (arrow), when they showed 13,171 short contracts with silver then at $10.48. one week later, on september 23 silver closed at $13.26, but the funds only covered 1,538 of those short contracts. That was an ill omen that the funds did not cover more of that short position then and indeed silver was not yet done with its waterfall panic, rush to liquidity plunge. By late october silver was back under $10 and did not forge a sure-enough bottom until the beginning of december, 2008. Interestingly, by the time silver did indeed make its seminal turning low in december, the mms had pared their pure short positions down to just 5,384 lots on december 9. )

the high short position for managed money traders is in part the reason that their collective net long futures positioning was so low in this may 15 report. As shown in the chart below traders the cftc classes as managed money reported holding a combined net long position of just 5,703 lots – not very much higher than the 4,752 contacts net long they reported at the end of 2011 in the december 27 cot report with silver then at $28.67.



as should be clear from the chart above, when the combined net long position for managed money traders (blue line) reaches the lower limits of the chart it often corresponds with lows in the price of silver.
continued in the following post...
 

swissaustrian

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Sure enough, since Tuesday silver briefly tested a $26 handle before catching a bit of a bounce. Silver is currently trading in the $28.30s as we write (a little above the May 15 cutoff of $27.69) and it will be extremely interesting to see if the “funds” have seen fit to begin covering some of those “temporary hedges,” and if so, how many of them.



Silver is testing “The Green” or the area we have been looking for support to show. We strongly suspect the MMs are covering some of their shorts, opportunistically, but we, like everyone else, will have to wait until the Friday release of the COT for confirmation of that notion.
Meanwhile, in a contrary sense, the COT data suggests that gold and silver are very close to a bottom, if one has not already been put in last week. In part because of the data shown above, yes, but also because of the positioning of the usual Big Hedgers, but that story will have to wait for another time. We have run out of “break time” and have to get back to our grueling, demanding and intense quest for things with fins and scales…
As we send this off to be posted we note that the AMEX Gold Bugs Index or HUI is up about 2.5% to the 405 level, and there has been little in the way of meaningful retreat for the precious metals on an up day for the Big Markets.
That just might be some continued short covering underway – into dips. If so, it ought to be visible in the next COT report and would be an unmistakable signal to traders and speculators who follow the COT data consistently.
Hold down the fort, help is on the way…
*We are between fishing events, but on relatively “low power” personally.
http://www.gotgoldreport.com/2012/05/cftc-managed-money-short-positioning-high-for-gold-silver-.html
 

swissaustrian

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Gene Arensberg's take on LAST week's COT. The data he is analysing is from 5-25.
The following video might be very useful for those of you who want to understand the impact of paper markets on pm prices.

In retrospect, he was absolutely right about his asumtion of a bottom

 

swissaustrian

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Managed money (mainly hedge funds) is even more short silver now than a few weeks ago, adding short squeeze fuel. They've always been wrong, so that's very positive news. The data is one week old.

Most Important Silver COT Chart for 2012

Mr. Arensberg wanted me to share with you-all the chart below, which he says is the “most important chart for the CFTC commitments of traders (COT) data for silver so far in 2012.” Gene already commented on the very bullish positioning in the Vulture subscriber charts over the weekend, but he wanted a visual representation of it available.

The chart is of the short positions by the traders the CFTC classes as “Managed Money,” including hedge funds, Commodity Trading Advisors (CTAs) and other funds that trade futures for clients. They are normally on the long side for silver futures, but over the past couple months they have been adding more and more short positions up to a new record high for the entire disaggregated COT report data going back to 2006.

Here is the chart:



Source: CFTC for COT, Cash Market for silver.

As of Tuesday, July 24, with silver at $26.93, Managed Money traders held the highest ever number of bets that silver would fall in price (17,575 short contracts).

Continued…
The high Fund short position is a big reason that the Managed Money net long position is so very low, at just 3,015 contracts. Their shorts offset a slightly higher number of longs. Here is that graph:



That is a very, very small net long position! And, if you believe like we do, a very low Managed Money net long position means there is a lot of buying horsepower sitting on “go” for when the Funds think a new rally is getting underway.

Mr. Arensberg is convinced that the Funds have built up that record high short position as a kind of insurance – a “just in case hedge” to protect them if silver broke down through the super-important long time technical support level of $26. (But silver did not break down through $26, did it.)

He believes that if silver were to move back higher, up through about $28.50 or maybe $29 or so, the Funds would be quick to buy back those short bets on silver – because it will have broken out of a bottom consolidation pattern.

What is more, once it is clear that the Funds have started closing out all those record high short bets, all the regular traders on the N.Y. COMEX will be trying to front run that short covering, sort of like switching on an afterburner. Then, when that is going on the other shorts might be trying to take profits, buying back their shorts all at the same time with the algo traders trying to jump on it for the ride.

“It could be an explosive move if that happens,” Gene said. “We could even see an offer vacuum for a little while, which we have not seen since January,” he added.

An offer vacuum is the opposite of a bid vacuum. They occur when many traders suddenly pull all their offers because the price is going vertical.

Gene isn’t predicting it as such, but he says it is definitely something to keep an eye out for and silver is not that far under where the fireworks ought to start, currently at about $28.

All I can say is … it’s about time for a silver reversal, isn’t it?

Colette Chapman for Got Gold Report
http://www.gotgoldreport.com/2012/0...-all-the-chart-below-which-he-says-is-th.html
 

swissaustrian

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Another great analysis of COT data and pm technicals by gotgoldreport's Gene Arensberg.
A must watch imho. Video was recorded on Sep 30th.

 

swissaustrian

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Found these great long term charts on gold and silver COT data in relation to spot prices. Updates are lagging by three months, however.

Gold



Silver

 
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swissaustrian

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I've recently discovered that a German investor offers free COT data analysis for gold, silver, platinum, palladium and copper.
His work is in German, however the charts in his weekly reports should be largely self-explanatory. Here is the link, he publishes his reports saturdays/sundays on a weekly basis.
http://cotsignale.de/

Click the links which are named "Metall-Update per ..." (English: metals update for [date]). A pdf will open with charts and brief comments in German.
 
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ancona

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I'll bet a dollar I can spot each OPEX on those charts SA. ; - )

Those look like my Uncle Aaron's EKG when he had his four-pack-a-day heart attack years ago.
 

pmbug

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Found these great long term charts on gold and silver COT data in relation to spot prices. ...
Seems to be a clear correlation on the gold chart. I'm not seeing it on the silver chart though.
 

swissaustrian

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Tonight's COT data should be very interesting. It doesn't cover yesterday's opex but I guess that positions were already in place for opex on Tuesday.

The last week (Tuesday to Tuesday) probably flushed out a ton of speculative longs. The really interesting part is now whether commercials reduced their short positions significantly.

Add on to that that the CME just lowered gold margins by 9%, one day AFTER opex...
http://www.zerohedge.com/news/2012-12-28/cme-lowers-gold-margin-9
 

swissaustrian

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HEAVY short covering by the commercials and the swap dealers as well as panic liquidation by speculative longs. Especially in silver, swap dealers reduced their net short position by 35% and managed money just capitulated by reducing 20% their net longs by 20%. Just as one would expect given the price action in pms. I like that very much. That's gonna make pm markets much healthier during the next week. Still, there's room for more of the same.

 
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