Questions About Analyzing Gold Futures COT Data

GATA’s Treasurer and Co-founder, Chris Powell, forwarded an inquiry to me from a precious metals market participant who had some questions about sourcing and analyzing gold futures trading data, like the Commitment of Traders (COT) report.  I thought I would share the questions and my response because I think it will help clarify a subject that has been heavily cloaked in opacity and confusion by Wall Street and the Government (CFTC).   Here was the inquiry:

As you can see by the Zeal chart – LINK –  the shorting of gold futures has risen to 200K contracts, which is at least a 16 year high.  While I realize that this is only one component of the manipulation of the gold price, I would like to follow it more closely.  Do you know where I can get the most recent data on gold shorts?

When I look at this – COT LINK –  it appears the 200K number comes from the commercial shorts only.  But why would Zeal only focus on the commercial shorts and not the net position?

When I look at this chart – Gold futures COT chart –  I’m very confused as to what I should be paying attention to.  What would you be paying attention to when looking to see what the trends are on the Comex?  Any suggestions are appreciated.

Those were great questions and I wanted to share that inquiry plus my response:

With regard to monitoring the long/short positions of gold/silver, you answered your own question.  This is the source:

If you want to follow the daily changes in open interest you can look here:

That report is updated for gold/silver around 10:00 a.m. every day, reflecting the previous day’s trade settlements.  It does not show which trading categories bought or sold, just the overall changes in open interest.

The shorting of gold futures is the primary “visible” component of manipulation.  The other components – OTC derivatives, leases and hypothecation are all behind the scenes, hidden from sight and it’s impossible to track those activities.  I believe that the more insidious exertion of manipulation occurs in those activities and that’s why it’s hidden from public view.

Adam Hamilton is behind the times.  Historically the commercial gross short position in gold and silver moved inversely with the price.  When the shorts were high, the price had been manipulated lower.  Then the commercials would reverse it by covering their shorts at a big profit, their gross short position would decline significantly and the short covering would drive the price higher.

The managed money “hedge funds” would take the other side and always lose money.

NOW the managed money – via algorithm-driven HFT trading – seems to have begun to piggy-back the the commercial selling momentum. That’s why now we are seeing large managed money shorts when the price is going lower.

To be honest with you, there’s so much fraud and corruption going on in the reporting of all of this information that it’s really pointless spending the time collecting the data, analyzing it and trying to understand it.  JPM was fined recently by the CFTF (a small, meaningless $650k fine) for stuffing commercial trade tickets into the managed money account bucket.  I guarantee you they still are doing this.

Also, there’s so may “eyeballs” now vs. 10 years ago looking at it that it’s largely removed any value from the information content (and that content is subject to high degrees of reporting fraud anyway).

People like Hamilton and Ted Butler make a lot of money selling newsletters analzying the COT data, so they will defend the value of doing so and the veracity of the data to the bitter end.

But the bottom line is that I wouldn’t spend much time trying to figure out what’s going by looking at the COT and open interest numbers. It’s become a waste of time.

I no longer put much energy in this endeavor, after having spend the better part of the last 15 years looking at the numbers religiously.  I now briefly scan the COT weekly and o/i numbers daily just out of intellectual curiosity to see where they stand and to confirm every week that my view on what I just laid out above is correct.

It is correct and will remain correct until the system collapses.

Hope that helps.

14 thoughts on “Questions About Analyzing Gold Futures COT Data

  1. Dave, you covered the bases succinctly and clearly. Little known aspects of the “market”, surreptitious activity and persistent misperceptions etc. No candy-coating or oversimplifying.
    I agree GATA has made great strides in understanding how all markets have been exploited and overextended to bleed their equity through every possible scheme of deception, fraud, overleverage and crosscollateralization. We are to the point of dysfunctional markets and cannibalized governance, which are just euphemisms for the stranger reality. And terms like systemic risk, market instability and political gridlock.
    Maybe debt and credit saturation, exponential money supply growth, hidden quantatative easing, currency “swaps” are (some of the) culminations. It happened before in Rome:

    Where there’s a will there’s a way
    Except when you live for today.
    Drunken can kicks down the road,
    Suppress urges to unload,
    But messages do convey.

  2. Could it be we’re in the early stages’ of a run on bullion? I checked my local dealer here in OZ, seems, a lot of stuff is out of stock in coins’ only rounds’ and numismatic way over spot stuff. Some thing is breaking. Medium and Big players are trying to sneak into stacker world and hope nobody notices’? it’s getting interesting alright. Only my opinion.

  3. Dave,

    Nicole Foss has a good article (Automatic Earth) on gold at DollarCollapse, Best of the Web. Did you read it and what do you think?

    1. Going to have to disagree with your assessment of the Foss article. She disregards the issue of manipulation and anyone who does that misses the biggest variable in the equation for analyzing the gold market.

      In fact, the real debate should be focused on why a paper gold market even exists. There is no legitimate reason for there to be a paper gold market. No, producer hedging is not a legitimate reason. Gold futures were introduced in 1974 for the specific purpose of manipulating the price of gold after the U.S. took the world off the gold standard.

      There were a couple concepts in his article that legitimate but the overall article was full of incorrect analysis and was a shameless defense of the paper gold market.

  4. Thanks’ for putting all this Ted Butler stuff in perspective too Dave. He is a good guy I believe, but given the numbers’ no one seems’ to be able to work out who owns what. When at first we practise to deceive as they say.

    1. “Good guy?” He was broker the Drexel Burnham. I worked with a lot of people who were ex-Drexel people and there were GREAT salesmen and extremely sleazy and would do anything for a nickel.

      1. Dave, here in OZ you can only take people on face value, but one thing I have worked out is you and Rory are straight up. Your breaking down of numbers and more importantly making sense of it for dumbie’s like me. As Sousa said the other day I don’t know how you do it. I definitely have no connection to this industry at large and no offence ever meant by comments’ If you or Rory need a break definitely down here where i am is pretty damn nice . Bit of prospecting too. I ‘d just say hope you try to look to the positive cause you are really appreciated.

  5. So many market analysts lost their credibility since the crisis of 08/09. Dave, now you shattered one of my last ones standing – Adam Hamilton. Seems you will be the only one left when the song is sung. 🙂

    1. LOL. I stopped reading Hamilton in 2005. His work is overbloated with repetitive commentary and a lot of useless information. He’s a windbag and I can tell he probably started out in life as a CPA

    2. “Seems you will be the only one left when the song is sung.”

      You mean ’cause everyone else will be dead and Dave will be the only one left, holed up in his shelter in the mountains?

      Seriously though, I think it’s reasonable to assume that everyone who ever posted on this site or Zerohedge for that matter has a bullet with his name on it. Jim Willie’s long rant today on Silver Doctors about the intimidation of 9/11 air traffic control witnesses is pretty scary, I can’t imagine how they’d let us purveyors of truth continue to preach after SHTF. Easiest just to get rid of us.

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