Currently skepticism toward the ongoing rally in the precious metals sector is rampant. A lot of it based on shamelessly presented analysis of the COT data. But the COT data analysts have been wrong since March on their doom and gloom outlook based on the attributes of the long/short data in the weekly COT report.
Let me preface this with the proviso that the veracity of the COT data is predicated on the reliability of reports generated by the likes of JP Morgan, HSBC and Scotia. If these banks are providing bona fide, non-fraudulent Comex data reports, it would be the only area of their entire business for which they are not publishing corrupted financial information.
The narrative promoted by the various false prophets of the precious metals market will have you believe that the net short position of the Comex bullion banks and the net long position of the hedge funds is at a record high and thus we can expect a massive price decline because of this. But the presentation format is highly misleading.
My fund partner compiles the weekly COT data back to April 2005. Too be sure, the open interest in silver futures is at an all-time high right now. But the “net” short / “net” long is quite different than might be construed from the piggishly superficial drivel that has been published.
Currently, the bullion bank short interest as a percentage of total open interest in silver is 71%. But the highest this ratio has been going to April 2005 is 82%. The average short interest as percentage of total o/i over the time period is 63%. Now here’s the shocker: the highest the short interest as percentage of o/i has been is 82% . In fact, from the week ending December 9, 2005 to the week ending January 27, 2006, the short interest as a percentage of total o/i ranged between 78% and 82%.
For the week ending December 9, 2005 thru the week ending January 27, 2006, the price silver traded higher (click on graph to enlarge). In other words, during a period of time when the relative short position of the bullion banks in relation to the total open interest was at its all time high, the price of silver moved up 37 cents, or 6%. And there was a violent price take-down in silver (and gold) but that did not occur until mid-May 2006.
Quite frankly I am as guilty as anyone out there in the obdurance of my view that a
price correction bullion bank price take-down is imminent.
Too be sure, at some point there will be a hefty pullback in the precious metals market – nothing goes straight up. But anyone who asserts that the market is not manipulated by the bullion banks and the western Central Banks is either disingenuously persuaded by ulterior motives or is a complete idiot.
Make no mistake, in the context of the massive price manipulation of gold and silver that has occurred over the past 5 years, it’s become infinitely more difficult – as if it isn’t hard enough as it is – to use historical measurement devices in order to make educated guesses on the next directional move in any of the financial markets.
I’m just a layman – not a former trader like you or Turd Ferguson …
But to me I say it doesn’t really matter what the COT is … there can be a short squeeze of course or it can also indicate a coming price drop as you mentioned.
But it doesn’t matter, does it ?
We know the gold and silver markets are 100% rigged … and I’m guessing the US Treasury and The Fed don’t really care about silver prices – they are going to try and smash down gold prices on the COMEX and silver will go down in sympathy. The bullion banks are the manipulators of silver prices I’m guessing, with The Fed and the US Treasury giving tacit if not direct approval.
But my point is the COT is irrelevant isn’t it, Dave ??? …. bec IF the Treasury tells The Fed to tell the bullion banks to slam gold back down then they will … no matter what the COT is … they will just print 1000s of paper gold contracts without adding a single physical oz of gold to the registered category until it shoves the price down.
To me it looks like the Fed and the Treasury are starting to lose the war now bec gold and silver prices went UP ANYWAY last week on the COMEX even tho 1000s more contracts were created!!!
And I’m thinking it’s bec there is an actual shortage of physical gold … that long term physical shortages are becoming impossible to hide now. Look at the condition of London vaults – according to Ronan manley of BullionStar there is maybe 130 tonnes of gold that’s available and unencumbered rnow in the London Gold Market … and now the DOUCHE Bank guilty plea and it will provide evidence on the co-conspirators … and COMEX in Dec 2015 hitting something like 540:1 paper fiat gold contracts to every physical oz of gold registered for delivery …
PS … pls notify me of replies
“… and I’m guessing the US Treasury and The Fed don’t really care about silver prices…”
I think they DO very much care about silver prices. Some have called silver the cartel’s Achilles heel.
There are those that could provide a brief succinct explanation; I’m not one of them.
OK … I just thought they care more about gold as money that is the main threat to the hegemonic Dollar as Reserve Currency than silver per se’ … that’s all I mean … I own a LOT of silver and recently swapped a LOT of gold bullion for silver bullion when the ratio got to 82:1 … my asset allocation went from 70:30 gold:silver to 50:50 … I fully expect to swap the silver BACK for gold once the ratio gets to 50 (40? 30? 20? … we’ll see)
And often the the reasons put forward for the guaranteed pullback are incorrect. One commentator has just published an article suggesting a “regression to the mean” makes it a mathematical certainty. The problem with his analysis is that its time data selective. He shows a chart with a moving average – 100 or 200 day, I’m not sure – and says that the price correction will be overshot to the downside. It might, but not for the reason he suggests.
However, since a regression is a time series, we can plot a least squares regression of monthly closes since 2000, and that trend line shows that a regression to the mean would result in a move upward to over $1600, largely because we have spent multiple months well below the trend line, and will most certainly overshoot.
So you can listen to him and take short term profit and possibly miss gold’s upward resumption, or hold tight and ride it up.
China manufacturing PMI slipping as stimulus fades …
BEIJING—An official gauge of factory activity in China edged down in April, signaling a modest weakening of momentum for the world’s second-largest economy …
Well, Dave, I suggest you listen to Bill Holter’s interview at SGT Report. There will be no ‘pullback’ in the price of silver. He is expecting moves of $18-20 a day and they won’t be long in coming. I think he may be conservative in that forecast! It is now too late in the game: the game has changed to one of ‘readjustment’, no, make that VIOLENT readjustment of the price of silver which is about to revert to its true value which, initially, may be as high as $120-130. It will go on up from there and if there are pullbacks, no one – and I mean no one – will know at what level you will see a correction! No one. Bill Holter quoted the now-famous phrase which his business partner, Jim Sinclair, coined (nice metaphor) a couple of years ago – these rallies [in gold and silver} will be the ones you never sell. Let that sink in. You will never sell them because if you do you will be back holding worthless paper money! So you hold your gold and silver for ever and use that to survive as best you can. The game has changed and will change so that ‘the game’ (of markets) will no longer exist.
“Too be sure, at some point there will be a hefty pullback in the precious metals market – nothing goes straight up. ”
Well probably at the early stages of this bull run; the manipulation machinery is alive.
It was a pretty straight run up in the stock/equities markets from ’09 into 2015 due to manipulation. When manipulation of G & S breaks down I suspect we will see something similar but much faster. If they are able to keep broad market indices up [despite some companies tanking] then slower, but still faster that the stocks ’09 to ’15. if the markets tank I suspect PM’s [and other tangibles that are highly useful] will rise so fast it is inconceivable at this time.
Quoting a previous article:
“There’s a flood of capital on the sidelines that stands ready to move into the sector but that is waiting for a big price pullback before initiating or adding to position.”