Gold & Silver: Bottom Not in Yet, Commercials ADD 23 Million Oz to Silver Shorts!

By Marshall Swing: Commercial longs added 581 contracts to their total and 5,155 shorts to end the week with 46.34% of all open interest, a huge increase of 3.18% in their share of total open interest since last week, and now stand as a group at 112,490,000 ounces net short, which is an increase of just under 23 million net short ounces from the previous week!
I will go on record and say the bottom is not in yet.

Large speculators added 1,209 longs covered a massive 8,474 short contracts increasing their net long position to 87,990,000 ounces, a huge increase in their net long position of well over 48 million ounces from the prior week.

Small speculators sold off a huge 3,077 long contracts but also picked up 2,032 additional short positions for a net long position of 24,500,000 ounces a serious decrease of over 25 million ounces net long from the prior week.

Now we know exactly what happened last week as price dropped from $27.91 all the way as low as $22 even before ending the COT week at $23.36  Price has moved very little since close on Tuesday afternoon and now stands at $23.20

The waterfall started last Friday morning and finished after hours on Monday for a total fall of $5.91

And we have the large speculators, hedge funds, to thank for this misery, all in the name of profit taking.

We cannot in any way blame the commercials for this situation as they picked up new shorts on the way to the bottom with some speculator long buying.

We knew this was coming as those hedge funds had been taking short positions hand in fist, right and left, in previous weeks since February 5th.  We just did not know when the profit taking was coming.

Is this the bottom?  When the hedge funds started the short selling the large specs had 6,588 contracts and the small specs had 10,961 contracts.  After this past week’s bloodletting those numbers stand at 22,103 shorts for the large specs and 17,777 for the small specs.  That is a difference of over 20,000 short contracts.  Traders who sell short want to cover for profit just like those who buy long want to sell for profit.

If the small specs are correct, we are quite some ways from the bottom as they picked up another 2,032 short contracts this last reporting period.

The commercials overall and the producer merchant significantly strengthened their net short positions so they could induce more downward motion but my guess is they are willing to sit back and let the speculators slice and dice for profit as low as they want.

In gold, it is extremely important to note the producer merchant and the swap dealer are within 500,000 net short of each other and that could be a dire circumstance to keep on the watch list.  With all the interrelated, automatic, dependent trading between gold and silver, it would not take much for the gold producer merchant to have offloaded the lion’s share of short positing onto the swap dealers.

In both metals, leftover shorts could opt out by slow, protracted covering, and seek long positions.

I will go on record and say the bottom is not in yet.

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