As suspected, the gains seen last week in both gold and silver ( and copper for that matter) were primarily the result of short covering. My view is that the bulk of this was tied to year-end book squaring ahead of Christmas and the New Year's holiday.

Starting with gold...

Daily Gold Chart

It should come as no secret to the readers of this site that the money to be made trading gold this year has come from the short side. With bears raking in the brunt of trading profits, it is only logical (and sensible) to expect them to book those gains and realize them.

As you can see from the chart, their buying was good for a $30+ move off the lows.

Here is the updated COT chart.
Daily Gold Chart

Gold CoT

You can see from looking at this chart that there was long liquidation that occurred over this past reporting period but most of that took place on December 17th when gold collapsed over $30 in a single day. That day was then followed by two consecutive days of short covering which was picked up on this reporting period and is observable on the chart.

The same thing happened in silver. Here is a reposting of that same silver chart I loaded on the site earlier today.

You can see the sharp selloff on December 17th which was followed by the same two days of short covering that occurred in gold.
Hedge Fund Outright Positions in Silver

Daily Silver Chart

As you can see, as was the case with gold, both long liquidation took place over this reporting period that ended Tuesday of last week as well as short covering. The brunt of the long liquidation occurred on the 30 cent price plunge on December 17th that dropped the price below $13.75. The next two days were when the short covering occurred as price then retraced the entire loss of the 17th and then some.

Today, we are right back below $14 once more.

As noted many times now over the past two weeks, both gold and silver remain mired in range trades. Maybe they will go somewhere next year but if the yield curve is any indication, the gold bulls may not be including that in their New Year's wish list.

I should note here, that the speculators continue shooting themselves in the foot as they remain NET LONG silver in a brutal bear market.

Silver CoT

As a matter of fact, the hedge funds continue to hold not far off the all time record high for outright long positions. They are approximately 13,000 longs off their October peak scored a couple of months ago. Clearly, these guys have not had any fun this year in the silver market!

Hedge Fund Outright Positions in Silver

Lastly, here is the same data plotted in a percentage term.

Hedge Fund Outright Long Positions as a % of Total Open Interest

Dan Norcini

http://traderdan.com

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on the day's price action. His editorial contributions and supporting technical analysis charts cover a broad range of tradable entities including the precious metals and foreign exchange markets as well as the broader commodity world including the grain and livestock markets. He is a frequent contributor to both Reuters and Dow Jones as a market analyst for the livestock sector and can be on occasion be found as a source in the Wall Street Journal's commodities section. Trader Dan has also been a regular contributor in the past at Jim Sinclair's JS Mineset and King News World as well as may other Precious Metals oriented websites.

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.

Dan Norcini Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.