USD Short Covering, EUR Capitulation Ending, Silver Spec Longs At Two Year Lows

Tyler Durden's picture

As we expected, the recent rout in the EUR and the spike in the USD have largely kicked out all marginal speculative elements. As the first chart below indicates, as of May 17 net non-commercial spec EUR contracts dropped by 19.8k from 61.4k to 41.6k, nearly a third of the current bullish bet. And as that was happening, USD shorts were covering rapidly, confirmed by the weekly change from 4,563 contracts short to just 1,270, the most bullish position in the USD since January 2011, and roughly where it was back in October 2010.

And probably more important, now that speculative fervor is all the talk, the silver net long positioning by non-commercials, contrary to conventional wisdom, is not only at an all time high, nor was it recently, but instead in the last week plunged to a level last seen back in April 2009. Net silver exposure has dropped by almost 60% since its recent peak in February (40,937 contracts), and at this point it seems all speculators have left the party. The new base is now being rebuilt based on much firmer hands.

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jeff montanye's picture

the article needs to delete an "only" when talking about net silver longs as it reverses the correct meaning.

Spalding_Smailes's picture


.... the smart money is on the sidelines 


Silver miners start hedging on price falls

February 14 2011


Not so fast. Hedging has made a comeback.

In the past two months, at least five miners have executed silver hedges to protect against a fall in prices, bankers say.

Deutsche Bank estimates that in excess of 100m ounces may have been hedged. That is several times the size of total outstanding hedges in late 2010, estimated at about 20m ounces, and 15 per cent of annual silver production.

Hugh G Rection's picture

$20 says the Smailes kid eats it.


I have a message from turd spalding....


Go fuck yourself.

tmosley's picture

You have to sell something to be a salesman.

But you wouldn't know anything about that, being a jealous unemployed gigolo.

Spalding_Smailes's picture

Got Ice Cream .... ? Turd does

So, so many contradictions ... Lol'

The end of the great Keynesian Experiment is upon us ( really ? ) Prepare accordingly. ( why all the new fiat driven businesses then ??? )


Turd in his own words. Let the sheeple keep feeding the turd in fiat deep down he loves it. Viva snake oil ...


Ultimately disgruntled by the fraud known as "financial planning", he retired to a career as a serial entrepreneur in 2008.

SilverIsKing's picture

Which word of Hugh's struck a nerve? Was it 'go', 'fuck', or 'yourself'? How dare he offend you like that Mr. Smallpecker!

Texas Gunslinger's picture

Turd is the only chartist I've seen who claims the entire PM market is manipulated and rigged...

.....yet charts it every night anyway.   


More hilarious than that, though, is the indignation and exasperation in his tone when his charts fail.  LOL



SilverIsKing's picture

I read Turd's blog and missed the part where he claimed the entire PM market is manipulated and rigged. Do you mind forwarding a link? Also, for someone so critical of Turd, you spend a great deal time posting there. Let me know how to find your blog. I'm sure many would be interested in your thoughts.

Hugh G Rection's picture

Here is Smailes blog King Ag-

Hugh G Rection's picture

Logged out as Smailes, Dungslinger?


If the rapture is tomorrow, does that mean your TX dungslinger sock account goes away?

Fiat2Zero's picture

So Tex,

Exactly how much do you get paid per hour to post your opinions?

Because there isn't much meat in them, if you know what I mean.

Since you are, without a doubt, being tracked by social analytical software, by those who pay your salary, how would they feel if they knew that your desperate efforts at swaying opinion were backfiring?

Then you'd suffer the fate of the RoboTrader replicant and the Zing replicant.

You see, I can't believe that anyone would waste their time posting the same content-free drivel over and over and over, unless of course he was getting paid to do so.

So you'd better wise the fuck up and start being more persuasive or your replicant ass is getting terminated.

Start posting things that have something of value in them or the checks are going to stop showing up in your paypal account.

Tell Robo-Ning hello.

longorshort's picture

40 dollars says you bought the top and are crying on the inside.

Tyler Durden's picture

The Dumbest Trade Ever? from Ted Butler

award for the dumbest trade of all time goes to Barrick Gold and its
ill-fated gold hedge. This is a trade that was doomed from the start.

The occasion for the award is Barrick’s latest attempt to close out and rid itself of this rotten trade. Here’s a pretty good review of the story.  Or, if you prefer, here’s the actual press release from Barrick directly. What’s not in the review or the actual press release is the suggestion  that this is about the dumbest trade of all time. Let me explain why I think it is.

even if everything goes as planned, the short gold hedge that Barrick
is trying to rid itself of, still won’t be closed out completely. What’s
more, Barrick has made previous announcements, over the years, that it
plans to close out its short gold position and has never completely
succeeded. A trade is really bad when you can’t close it out even after
you decide and publicly announce your intention to do so. Who allows
themselves to get into a trade that you can’t close out, even if you
want to?

in the article or the press release is stated the total cost of
Barrick’s venture into short gold hedging. Let me rectify that. My
estimate is that Barrick has lost, in total, more than $10 billion
overall since it started the nutty idea of over-hedging its gold
production. That’s larger than any single derivatives loss on history.
That’s more than Barrick has earned in its existence. That’s $10 billion
that could have gone to shareholders in the form of dividends, or to be
used for acquisitions or legitimate corporate purposes, like
eliminating debt or buying back shares. Instead, it was $10 billion
completely squandered. Now, shares must be issued to pay for the gold
short loss, diluting shareholder value. To add insult to injury, the
management responsible for such a debacle rewarded itself lavishly.

the magnitude of the loss and the ineptitude of entering into a
transaction in which there is no ease of exit are but two components of
what makes this the dumbest trade of all. The deciding factor that
crowns this the worst trade of all-time is how long the trade has
existed and how much Barrick was warned all along about how the trade
made no sense. The level of arrogance displayed by Barrick management
over the years to anyone, including shareholders, who tried to point out
the folly of the short gold trade, boggles the mind. Please remember,
the gold shorts being closed out now by Barrick were established at near
$300 an ounce, meaning losses of $600 to $700 per ounce are now being
taken on millions of ounces. I would submit that would be hard to
accomplish, even for whoever might be the world’s worst trader.

was one who warned Barrick about the folly of this trade before anyone
else, to my knowledge. In fact, my very first writings on the Internet,
going back to 1997, concerned leasing and forward sales and Barrick.
Incredibly, after my warnings, Barrick dramatically increased the size
of its short position. Here’s an
article from 2006, about Barrick (and a silver hedger, Apex Silver,
that eventually went bankrupt due to that hedging), that contains links
to some earlier articles.  I didn’t just warn
Barrick, I warned their accountants and auditors, the CFTC, and even
complained to the SEC about Barrick’s fraudulent hedging and
non-disclosure to shareholders. The great irony is that the lack of
action by all involved, who supposedly exist for shareholder and public
protection, played heavily in the subsequent $10 billion loss.

Bay of Pigs's picture

So what. Barrick was/is the poster child for corruption in the gold sector. Peter Munk is no better than Dimon or Blankfein. He is a lying sack of shit and belongs behind bars.

Hephasteus's picture

Barrik is getting one of it's mines massively attacked by gangs as big as 800 people trying to break in and "steal" gold.  They are using huge amounts of security and successfully stopping it but it'll eventually become trying to mine in a war zone.

Transformer's picture

To understand this trade, we need to know who was on the other side, who was making a killing on the other side.  I would bet anything it was a large bullion bank with undo influence on Barrik management.  Instead of Barrik making a lot of money, the other side of the trade made the money.  And perhaps that was the point, the very reason for the trade.  Or maybe it was a good hedge for the bullion bank to cover a lot of naked shorting over the years.

Just as Gordon Brown made the worst physical sale of gold in history, all we need to know, to have it make sense, is to know who bought it.  With Brown, was it the royal family, the Rothschilds, some other royal family?  These things don't happen because of some bumbling executive trading decision, these things happen for a reason.  When a huge gold mining company or a sovereign lose big time in the gold market, who is winning?  Find that out and it will all become clear.



Bay of Pigs's picture

All the evidence I've ever seen point right to JPM, the FED's chief agent in the markets. 

bigdumbnugly's picture

 i once had peter munk and needed a shot at the clinic to get rid of it.  Nasty.

LowProfile's picture

Mmm...  From a fundemental perspective, that seems to indicate resources Barrick could put into mining instead go into covering the short, which means less supply. 

In the grand scheme, probably not terribly significant, but it's yet another straw on a straining camel...

Spalding_Smailes's picture

Yes, but those miners ( silver ) will have avoided a 50-70% drop .... 

tmosley's picture

You're going to be held to that statement.

Spalding_Smailes's picture

And what about your moronic statement ( silver never ever drops below $35 again ) as it sliced past $49.00 on its way toward $70.00 ..... ????


In your words, get the fuck out you goofball .... 


PIN (fucking) DROP .... Again after T-bag gets his ass handed to him he goes silent, I love it


You sure do get slapped around on ZH ..... You should get help at a halfway house .... Lol

tmosley's picture

Physical silver, numbnuts.  In fact, I specifically said in February at the latest, that paper would, in fact, enter a period of high volatility, trending toward zero.

But then, you wouldn't know the difference between paper and physical.  

Because you are a retard.

scratch_and_sniff's picture

You're obsessed with retards. Each to his own i suppose.

Captain Planet's picture

its just something in the blood.

some have urges to set other feeble minds straight.

great if you have restraint. it is often a sign of strength.

but don't come down too hard on those trying to pursuade others to wake the fuck up, this isn't disneyland anymore

scratch_and_sniff's picture

Nah, tmosley is totally anti-spastic, he's a spastic nazi.

fuu's picture

At least he didn't call him a faggot.

longorshort's picture


   *     *

*           *   Even bigger numnut who likely bought a top because extranormal talking bears said this time was different in silver.

tmosley's picture

Retard trolls should learn their place.

My dollar cost average is about $16, idiot.

Also, fail ad hominem is fail.  "Hurr, da bears said it it must be wrong, nevermind that da bears was made by da industri prufesinal, an da format is just a easy way tuh make a video wit audio, HURP."

Troll Magnet's picture

hey spalding smailes,

a few years ago my mother handed me a big bag of coins (her loose change over the decades) because she just wanted to get rid of them.  at first i was annoyed because i didn't want the trouble of going through and sorting them.  but my wife did.  and in it she found hundreds of pennies, nickles, dimes...along with dozens of junk silver coins, ASEs and morgan dollars.  and when i looked at those silver coins i was startled and felt like my mother had just given me a bag full of treasure.  i've been buying physicals since. 

i bought a monster box of silver when spot + premium = $50 and change last month, so yeah, i'm one of those top buyers you seem to enjoy picking on.

i also bought at $38, 32, 28, 26 and 21.  and i'm about to buy more gold and another monster box of silver this week or next.

by no means am i happy that i purchased a monster box of silver at the top.  but along with my gold stash, i'm pretty psyched at the thought of handing them down to my children when i grow old.  just last year, i tracked down and bought a 2oz gold lunar coin that was minted in 1999, the year of my beloved niece's birth, and gave it to her for her birthday.  should've seen the look in her eyes when she held it in her palm in wonder.  her first words in amazement: "this is GOLD!"

i'm not sure if doomsday scenarios will play out as many here on ZH predict.  but i do know that gold and silver are treasures.  and i prefer them to unlimited federal notes being printed by bernanke and other central banksters. 

my point is that a contrarian's point of view is necessary but when you start bashing PM holders relentlessly for the sake of bashing them, your credibility diminishes and become annoying.  buy some physicals and try giving them as gifts to your loved ones.  they may go down or up in $ terms but your loved ones will NEVER, EVER ask for a gift receipt so that they can return them.  can't put a price tag on that IMO.   


RockyRacoon's picture

Good story.   I like anecdotes that point out the tactile response to gold and silver.  I can remember my first Morgan dollar.   Completely hooked after that.   I'm old enough to remember using silver coinage as real money but just as a kid.   Here is an article with some interesting charts, especially the silver price in nominal terms and the CPI and Shadowstats CPI:

Silver Price Collapse Reminds of Risks in Paper Market
jeff montanye's picture

patience.  from the perspective of 2015 it may be hard to distinguish $50 silver from $34 silver.

hack3434's picture

WRONG! Minera Frisco (Biggest hedger out there) has been taking a beating YTD. One can safely assume that they had something to do with the massacre of May. After all, Carlos Slim is known as a ruthless WELL CONNECTED businessmen. 

From Reuters:

Frisco, which reported earnings of $4.3 million in the quarter ended March 31, was short just under 95.759 million ounces of silver as of April 30 compared with a short position of 70.120 million ounces at the end of 2010, according to filings with the Mexican stock market. The company said the short positions were assumed to support the company's investment program.

In its most recent filing, Frisco reported a short position of a notional 34.478 million ounces in silver swaps at an average price of $25.06 per ounce as of April 30, according to filings with the Mexican stock market.

The company was short 24.840 million ounces at an average price of $18.82 an ounce as of Dec 31.

Frisco also held a notional 61.28 million ounces in options collars on silver with a long put positions at an average of $23.82 an ounce as of April 30, along with offsetting short call positions at an average of $39.97 an ounce.

As of the end of Dec 31, Frisco's silver options collars amounted to 45.280 million notional ounces with an average put price of $21.79 per ounce and an average call price of $39.70 per ounce.

The positions mature between 2011 and 2013.

Frisco's hedging positions are heavily out of the money even after silver's recent correction. Spot silver was bid at $39.36 an ounce in late trading on Wednesday.




swissaustrian's picture

Maybe Barrick had a gold carry-trade going to finance it´s operations? Just an idea of mine...

Yen Cross's picture

 Another keeper for weekend research. Thanks. The Squandered,Legitimate dilution of the post is trading perfection. I don't own Barrick. Ineptitude and over bought are synonymous! NO?   P.S. I don't junk the hand that feeds me. Your crew is fantastic!

JW n FL's picture

You might not like what Tyler has to say.. but he is factual and honest.. not just honest in one faucet of thought but in multiple.. he tries to help, he tries to make the World a Better Place with his Honesty and mostly gets pissed on for his effort.. I dont mean us here.. we Luv Our Bro! but outside of here, he is shunned by the money changers in the Temple..


Please never stop Tyler! Please, Pretty Please ALWAYS spread the Truth!

rocker's picture

+1   Always good stuff.  ZH Rocks.

Troll Magnet's picture

i have to say...i've been reading ZH for about a year now learned more about economics than i ever have including 4 years of little ivy education.  i still don't get a lot of things because i'm not and have never been a trader - i have a REAL job.  Ha!  but i am picking them up one by one and it's been an eye-popping experience.  

Pegasus Muse's picture

To hell with the money changers.  If there is a just God this will be their end:

Troll Magnet's picture

speaking of which, it's already saturday (past 2pm) here in asia.  where's jesus? 

wait...does this mean...oh, NOOOOOOOOOOOOOOOOOOOO!!!!!!!!!!!!!!!

buzzsaw99's picture

over-hedging is a fool's gambit.

ebworthen's picture

Thanks Tyler,

That may explain why the fund that has Barrick as a component took a dive around January (?).

How stupid of Barrick.

AldoHux_IV's picture

Points to the fact that even hedging for commercial purposes needs to be reviewed closely-- when companies that are supposed to make money from the production/refining of a commodity can make or lose more money 'hedging' then it becomes a whole different game then what the futures were initially designed for.

In a world where the regulators are in cahoots with the market manipulators of course this makes no real difference on how the markets should be governed.  Just another note in a long list of observations on how our markets are truly no better than 3 card monty.

SYantiss's picture


I'm really new to the whole trading mantra and have made some astoundingly bad stock trades.

I don't read some of the acronyms very well, and have a hard time descifering some of them...

I have bought a small amount of silver at $19, $24, $36, $42... I do not "need" to sell any of this at this time, but I'm pretty close to "full in".

Based on this article, I get the impression that I should sell and buy back at $26 or so...

I'm not looking for specific advise, just clarity in what this means...

I really don't know who is a "troll" or Govt agent, or whatever, here... I'm just looking for an explanation to my wife of why I'm doing ___.

tickhound's picture


I'd run for the hills, dude.  I'd sell all of your "full in", yet "small amount" of silver and get out while you still can.

Tell your wife you've been advised that all weak hands should dump cuz $9 is to be re-tested and its green shoots and asparagus for everybody.

Tickhound, Tyler's other handle.

StychoKiller's picture

Silver & Gold (along with the other PMs) are wealth INSURANCE -- can you have too much insurance on your wealth?