The Commitment of Traders Report, for positions held at the close of Comex trading on Tuesday October 7th 2014, did not change much compared to a week earlier. The reporting week included October 3d on which silver was trading at its absolute lows. According to Ted Butler these lows didn’t mean much, as there was so little volume associated with them, that they were more fishing expeditions by JPMorgan and their High Frequency Trading buddies, than anything else. The powerful rallies [with high volume] off those lows pretty much negated any improvements in the COT Report that would have shown up if those rallies hadn’t occurred.
Ed Steer analyzes in his daily gold and silver newsletter the COT report (www.caseyresearch.com/gsd) for the reporting week in which silver reached $16.70 and gold $1185:
In silver, the Commercial net short position actually increased by 1,479 contracts, or 7.4 million ounces. The Commercial net short position now stands at 81.2 million ounces. Ted Butler says that JPMorgan’s short-side corner dropped by about 500 contracts during the reporting week — and now stands at 10,500 contracts, or 52.5 million ounces of the stuff, which is a huge percentage of the total Commercial net short position. Ted Butler also said that this is JPM’s smallest short position in silver since they took over Bear Stearns back in mid 2008.
Under the silver hood in the Disaggregated COT Report, the Managed Money sold 1,200 long contracts—and covered 835 short contracts, so their net short position is a new record high, albeit by a small amount—365 contracts.
In gold, the Commercial net short position also increased, but it was only by 2,678 contacts, or 267,800 troy ounces. Their net short position now stands at 6.34 million troy ounces. Ted Butler says that JPMorgan’s long-side corner in gold is now 2.1 million troy ounces.
In the Managed Money category, these traders sold 1,200 longs and covered 140 shorts, so they increased their net short position in gold by the difference between those two numbers.
What do we make out of the current gold and silver futures positions? One thing is clear, as both Butler and Steer have reiterated, the rate of accumulation in short positions of commercial traders (read: J P Morgan Chase & Co (NYSE:JPM)) during the next rally will determine to which extent the rally will run. So far, after the silver price peak in 2011, all rallies have been capped by aggressive shorting by commercials. Is there a reason to believe this time will be different? Although hesitant, COT analyst Ted Butler believes there are reasons to believe that it could be different with the next precious metals rally.
From Ted Butler’s latest premium update on www.butlerresearch.com:
I’m thinking the commercials and JPMorgan will let it rip this time. Why?
For one reason, the manipulation and commercial dominance has gotten out of control, not just in silver and gold, but in many other commodities as well. In addition to COMEX copper and NYMEXplatinum and palladium, the technical fund/commercial price dominance has come to effect too many important commodities, like Crude Oil and currencies. Just this week, crude oil accelerated its price decline to two year lows, all based upon crooked NYMEX dealings. In fact, there are major commercial / technical fund imbalances in more important markets than not. The hard commodities are configured for major price advances as are the currencies (lower on the US Dollar Index). I don’t recall an overall similar set up to this extreme.
These paper market manipulations are causing severe dislocations in the real world and it is only a matter of time before someone notable (not me) makes the connection between the futures markets and prices of the actual commodities. Countries are starting to notice that prices have become irrational and not in synch with real world supply and demand facts (Russia and South Africa in platinum, for example). Sooner or later, the actual functioning and legitimacy of the regulated futures markets will come under scrutiny. When that occurs, more will come to see what I (and most of you) know to be the case, namely, that the CME Group, along with major banks are running the world’s largest bucket shop, where prices are what they alone decide them to be – nothing more, nothing less. This should prove particularly advantageous to silver, where I believe the whole sick scheme started more than 30 years ago.
Lastly, this spreading manipulative scheme can’t continue indefinitely and will cause its own demise by how it distorts the real world of supply and demand. The level of legitimate hedging in all markets is rapidly shrinking (despite CME Group’s non-stop commercials to the contrary) and has been replaced by unbridled speculation, thus undermining the whole concept of why futures trading exists. Thus, the crooks at the CME have sowed the seeds of their own destruction. Silver should prove to be the star performer as this process unwinds because it has the best set up of all. The CME (and the CFTC) should have never allowed such a large technical fund short position to come into existence, but now that it exists, it has become the silver investor’s best friend.