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2012-08-11 — caseyresearch.com

While on the subject of these two ETFs, the new short interest numbers for both were posted on the shortsqueeze.com Internet site late on Thursday night. So late in fact, that I never saw them, because I checked twice earlier in the evening, and they weren't there.

What they showed, did not amuse either Ted Butler or myself.

In silver, there was a whopping increase in the number of shares/ounces sold short in this ETF. The short interest blew out by 30.22%...to 14,784,600 shares/ounces, an increase of 3,431,300 shares/ounces from just two weeks ago.

The numbers for gold were equally atrocious. The short interest rose 28.67%...up to 21,749,900 shares sold short, or 2.17 million ounces of gold. That was an increase of 4,846,600 shares, or about 485,000 troy ounces of gold over the two week reporting period.

It was obvious to Ted that rather than go into the market to buy the physical metal and drive the prices up, the authorized participants chose to short the shares in lieu of doing that.

As of the cut-off for this report, GLD is owed just under 68 tonnes of gold...and SLV is owed 460 tonnes of silver. This is what would have to be added to cover all the short positions outstanding in each ETF.

One can only imagine what the prices of both silver and gold would be if the short holders actually had to purchase the metal to cover these short positions.

That's the reason why I wouldn't touch the shares of these ETFs with a 10-foot cattle prod.

...

Yesterday's Commitment of Traders Report was a mixed bag. I had expected an improvement in the Commercial net short position in both gold and silver, but only got it 50% right.

In silver there was a small increase in the Commercial net short position...490 contracts to be exact. This position now stands at 21,852 contracts, or 109.3 million ounces of silver. The report also shows that the four largest traders are short 162.8 million ounces...and the '5 through 8' largest traders on the short side, are short an additional 39.1 million ounces.

These eight traders are short 185% of the Commercial net short position and, when the market-neutral spread trades in the Non-Commercial category are removed, the four largest traders are short 34% of the entire Comex futures market in silver...and the '5 through 8' largest traders add another seven percentage points. So...the eight largest traders are short over 41% of the entire Comex futures market in silver.

In gold, there was a decent improvement in the short position from the prior reporting week. The Commercial net short position declined by 9,594 contracts, or 959,400 troy ounces of gold. This short position is now down to 14.64 million ounces. Not the lowest ever, but still a very low number. Ted says that the 'big 4' traders covered short positions aggressively during the reporting week.

Of that 14.64 million ounces, the four largest traders are short 8.66 million ounces...and the '5 through 8' largest traders are short an additional 4.50 million ounces. The eight largest traders are short 13.16 million ounces, or only 89.5% of the Commercial net short position in gold. Compared to silver [at 185%]...gold is practically a 'free market'...LOL!

On a net basis, once the market-neutral spread trades are removed from the Non-commercial category, the four largest traders are short 23.6% of the entire Comex gold market...and the '5 through 8' traders add another 12.3 percentage points to that. So, that means that the eight largest short holders, are short 35.9% of the entire Comex futures market in gold.

...

Now for the Bank Participation Report. These are Comex futures positions, both long and short, held by both U.S. and non-U.S. banks at the close of Comex trading on Tuesday...the same time as the COT Report. The data for the BPR is extracted from the COT data, so for this one day a month you can compare apples to apples.

In silver, 4 U.S. banks are net short 20,465 Comex contracts...and you can bet the ranch that JPMorgan holds 80-90% of this position all by themselves...and I suspect that HSBC USA holds almost all of what's left. This amount represents over 93% of the 21,852 contracts of the Commercial net short position shown in the COT report above.

The 13 non-U.S. banks that hold Comex futures contracts in silver are actually net long 828 Comex futures contracts, so their positions are immaterial. As I say every month at this time, the price management scheme in silver is 100% "Made in the U.S.A."

From the July report to the August report in silver, the 4 U.S. banks increased their net short position by 2,193 Comex contracts...and the 18 non-U.S. banks decreased their net long position by 76 contracts. Any questions as to what banks control the silver price?

In gold, 4 U.S. banks are net short 57,689 Comex gold contracts. Although JPM and HSBC USA hold large chunks of this position, they aren't anywhere near as dominant in gold as they are in silver.

The 18 non-U.S. banks that hold Comex futures contracts are net short 40,573 contracts.

Between these 22 banks, they hold Comex short positions totaling 98,262 contracts, or 9.83 million ounces. This represents 67% of the Commercial net short position in gold shown in the COT Report above. The price management scheme in gold is spread out over a lot more banks...and it's obvious that the non-U.S. banks are major players here, but are non-participants when it comes to silver.

From the July report to the August report in gold, the Commercial net short position dropped for both U.S. and non-U.S. banks. The 4 U.S. banks' Comex short position declined by 18,206 contracts...and the 18 non-U.S. banks showed a decline of 9,376 contracts.

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