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Extreme Gold Positioning Grows As Hedge Funds Add To Record Shorts
With an all time high of 293 ounces of paper per ounce of registered physical gold...
...it appears hedge funds continue to ignore systemic risk and surging physical demand, following the trend lower in paper gold prices by adding to already record short positions in gold last week. With the speculative world near-record long the USDollar and record short gold, how much longer can the status quo boat can remain upright with so many on the same side.
The normal market position is for speculators, such as hedge funds, to be net long, averaging about 110,000 contracts. But as GoldMoney details,
Only twice since the Commitment of Traders disaggregated data has been made available has this condition not been true: last July and today. The market's sentiment is indeed at an extreme, making the paper markets vulnerable to a sharp correction of trend. The problem, as with all bubbles, is that we know this must end soon and violently, but we don't know at what level prices will revert.
Meanwhile, demand for physical metal notches up on every markdown. The reason this can occur and prices still fall is that there is a large body of above-ground stock in vaults to draw down. However, the stock in western vaults has been depleted by accelerating Asian demand, far in excess of the sum of mine production and scrap. Since 2011, the Chinese public alone have taken delivery of 8,645 tonnes of gold, during which time annual demand has more than doubled.
It is important to note that Asian buyers are savers, rather than investors. This distinction is crucial: a saver invests for the long-term and is only interested in value. Investors nowadays are interested in a shorter time horizon, are generally unconcerned with value, and will only buy into a rising trend.
Furthermore, as Acting-Man.com's Pater Tenebrarum explains, even while gold’s fundamental price according to Keith Weiner’s calculations (in which he compares spot to futures prices) stands some $140 above the current market price (as of the end of last week), futures market speculators have turned more bearish on gold than at any time in the past 13 years.
When there is great unanimity among traders about a market’s direction, they are very often going to be proved wrong – at least in the short to medium term (i.e., over time periods lasting from weeks to months). The caveat is that even more pronounced positioning extremes have occurred in a few short time periods during the 1980s and the 1990s, and there is obviously no law that says this cannot happen again.
Last week, the smallest net speculative long position since January of 2002 was reported (this chart shows the net hedger position, which is the inverse of the net speculative position) – click to enlarge.
However, it is still quite noteworthy that speculators as a group are more bearish on gold today than they were at the lows of its 20 year long secular bear market in 1999-2000. This definitely means one thing: once a rally does get underway, there is going to be a lot of fuel to support it as this extreme in pessimism unwinds. Gold stocks meanwhile continue to diverge positively from gold and silver, just as they have exhibited persistent negative divergences near the 2011 – 2012 highs.
Here are a few more charts illustrating the current situation; first different ways of charting the net positions of speculators and hedgers:
Net speculator and hedger positions, as well as open interest in bar chart form – click to enlarge.
The next chart shows the very same thing, but trader positions are further dehomogenized, with small and large speculators as well as hedgers shown separately in a line chart. Open interest is charted as a line as well. Open interest in COMEX gold futures is actually historically quite large at the moment.
Gold futures market positioning dehomogenized further – click to enlarge.
The Bullish Consensus Compared to the 1999-2000 Lows
Sentimentrader has created the so-called Optimism Index, or Optix for short, which is an average of the most popular and well-known sentiment surveys and positioning data. From the web site’s description of the indicator:
“To calculate this gauge of public opinion, we have created an index based on many of the established surveys currently in existence, some of which are noted below, along with other measures of sentiment, such as from the options and futures markets. The combination of that data is the foundation of the Optimism Index, or Optix.
No matter what population the survey monitors, it tends to correlate very highly with all the other populations. People tend to think alike, and it’s rare to see any of the surveys diverge too far from all the others. The correlations among them are very high, and have been consistently so for many years.
Like most sentiment data, this one is a contrary indicator. When optimism becomes too high, we should look for prices to stall out or decline; when it is too low, we should look for rallies.
When the Optix moves above the red dotted line in the chart, it means that compared to other readings, we’re seeing a statistically extreme value. The bands are based on the past few years of trading, but you also want to look at the absolute level – if it’s at 90%, then there’s no question we’re seeing an historic level of bullish opinion. Watch for readings above 80% (or especially 90%) to spot those dangerous times when the public is overly enthusiastic about a commodity.
Conversely, when the Optix moves below the green dotted line, then the public is too pessimistic about the commodity’s prospects for further gains compared to their opinion over the past year. Looking for absolute readings under 20% (or especially 10%) can lead to good longer-term buying opportunities.”
The Gold Optix readings since mid 2013 are among the lowest in history. On average they are far more extreme than those recorded at the secular bear market lows in 1999-2000. The most recent reading showing bullish consensus of a mere 14% is only 6 points above the all time low recorded in late 1997 and lower than any of the readings of the 1999-2000 period (the absolute low in that time period was seen in late February 2001 and stood at 16%) – click to enlarge.
As you can see, the recent period has been one of quite persistent and extreme pessimism. Since sentiment is largely a function of price movements, one must of course not overestimate its meaningfulness. However, one thing is certain: rare and noteworthy extremes tend to at least have short to medium term significance. Once a long string of extreme readings has been recorded, the probability that they will prove to be of long term importance rises strongly.
This is especially so given the fact that gold is currently approaching an important technical support area in the $1,040 to $1,050 region (the March 2008 high). Moreover, there are actually many parallels to the 1999-2000 period, most notable among them a rising stock market combined with ever greater weakness in junk bonds, a tightening Fed and concomitant dollar strength, and a flattening yield curve.
The flattening yield curve, illustrated by the ratio between 10 and 2 year treasury note yields. In the short term, this flattening is actually quite bearish for gold, but at the same time it is actually long term bullish. This is so because it will ultimately trip up the echo boom and the economic recovery (such as it is), and bring about a reversal of the Fed’s current monetary policy stance – click to enlarge.
The next chart shows what has happened in terms of Fed policy and the dollar in 1999-2000 compared to 2014-2015. This may be helpful in terms of providing a potential road-map:
Fed policy, the dollar and gold in 1999-2000 vs. 2014-2015 – click to enlarge.
Conclusion: As we have pointed out on previous occasions, it is time for both traders and investors to pay very close attention to this market. What could turn out to be a major opportunity is slowly but surely taking shape.
* * *
After this week's shake-out of USD longs courtesy of Draghi, one wonders if the gold squeeze is about to begin?
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Nice
That's really funny..... I always thought that Obama was talking out of his rear when not reading his teleprompter.
If this happened one before in July and the price has declined since then, why must the result be any different this time?
No difference. It will be the same as July...but then anyone's guess is as good as any - the only difference is the number of impressive charts.
For sure a rally lies ahead, and it will be large enough to be tradeable (Along with the Commercials who will drive it). The bigger question is whether the Commercials will, again, go progressivley Short as they allow the Specs to exit their short positions and the market rises with the Commercials capping the rise by adding Shorts, If so, then this will be just another "Rinse" cycle in the ranges which will then trigger the commencement of a new "Wash" cycle as the Commercials then push prices lower and start to cover their newly-acquired Shorts. And of course make a ton of moey in both directions at the expense of the clueless Specs who always seem to come back for more, largely because, unlike the Commercials, they don't hunt as a pack so get taken out to the garden shed each and every time.
Such a manipulated market involving the unlimited addition of leveraged "Paper" Gold serves only the interests of the ESF/CB/BIS/BB complex for the purposes of controlling the price of Gold and profiting handsomly from the implicit backing of Big Brother and in the environment of a captured "Regulator".
Keith Weiner should spend less time making up bullshit "fundamental prices" and more time on the treadmill.
People that fat - at such a young age - often die by the time they're forty.
But it's not like there are really any "real" people doing much of any substantial trading in these criminally fraudulent and manipulated paper PM's markets. Anyone who tries typically gets flushed out by the banksters and they lose their money every time.
Do not...ever...play in their criminal PM paper games or you will get burned every time.
The article acts like this record short is due to some majority of individual investors collectively taking this position. And that's obviously total bullshit.
This massive short is totally due to JP Morgan and other big criminal banksters who not only get free fiat from the Fed to fund this criminal operation, but the Crimex also gives them bulk order discounts on top of that!!!
And not to mention as well that computer programs are also used to control all this shit and TPTB can run the paper PM prices up or down to any number they choose.
This is not even a market. It's not a free place that humans go to trade with each other based on value, supply or demand.
It's existence is based on fraud in order to prop up the criminal fiat currency monetary systems all over the world, especially and most of all the U.S. dollar.
China knows this all too well and they've been using the manipulation of lower spot prices to continue stacking real phyzz by emptying the vaults in the West using the very worthless fiat paper that the West prints out of thin air!!!!
And that's exactly what you and I have been doing as well and we need to continue to do it until this all finally implodes and the world monetary system starts over. And...if we are lucky to survive the world wars coming then hopefully we'll benefit somehow on the other side with the phyzz and other essential gear and supplies that we stacked away.
@S_A
"This massive short is totally due to JP Morgan and other.............."
Your ignorance is showing and it is colossal.
Vint Slugs, your nothing more than a bankers TURD!
Here is an education for you Vints: http://www.tfmetalsreport.com/blog/7316/historic-comex-positioning-and-other-oddities
the Morg is the largest short on the silver futures paper market...maybe they aren't the largest short on the gold side, but there is still no doubt they are colluding with the other big banksters and their other insider "pals" to create the massive short-side bias on the Crimex in gold and silver.
For example: http://investmentresearchdynamics.com/why-is-jp-morgan-taking-delivery-o...
If you want to argue with Dave Kranzler about his JP Morg silver data, well be my guest. I'm sure he'd expose your colossal ignorance in no time flat.
Argue about the gold shorts if you want...but whether it be JP Morgan or the Fed itself; who fucking cares????? Just because you're apparently missing the point doesn't mean you need to be a fucking asshole.
It's still a criminally manipulated market 100% no doubt about it. Why don't you fill us all in of your "colossal" wisdom on the situation? Bring something more to the table on the subject other than just being a fucking douche bag.
+1 to INFINITY.....BITCHEZ!!!!!!!!
"slugs' must Jamie Dimon
The paper ponzi pyramid reaches skyward!
Imagine when they realize that their "gold" is only paper and then they are all selling.
Oh, they know.
I'm starting to think that this may actually be a play based on the assumption COMEX defaults. What do you think will happen to the exchange paper price when there's no gold to deliver? The hedgies can write their shitty, unbacked shorts, COMEX implodes, and they cover buyng back their cheap, no-gold-delivery-possible contracts.
So this is really a play taking advantage of anyone stupid enough to be long paper gold.
Isn't this sort of the scenario FOFOA painted before gold becomes unhinged from paper?
Comex default? On fiat? Not a a chance. You know they have the option to settle in cash, right? No one can do anything about it. For all they care, they could be holding no physical and still people will be buying ETF's.
I know, and so do the hedge funds.
What's the value of a gold contract going to be with zero gold? Who will buy it when the underlying commodity isn't 300:1, or 500:1 contracts to physical but 1000:0? What I am saying is that without the ability to deliver any physical gold whatsoever, the contracts become irrelevant and disconnected from the market entirely. Yes, the contract can be settled for cash, but at the point that happens, you've got a cash-in, cash-out bank. People can get that done anywhere, with no need for gold contracts. Demand for those contracts will go to zero.
The price on comex is the price of their contract, not gold, which is why the phyz players get so pissed that they use it to manipulate the phyz price. When there's provably zero connection because the contracts are forcibly settled in cash, what's the demand for those contracts going to be?
This is like selling a house on a known fault line before an earthquake. You (i.e. hedge fund) sell your house (gold contract), pocket the money, and the buyer holds title to a house; once the earthquake (i.e. the default) happens, the buyer still holds title to the house (the gold contract still exists), but it has no value besides what people will pay for an undeliverable contract, the underlying asset isn't there. In this case the hedge fund can cover at whatever the settlement price will be, which will be lower (probably far lower) than what they sold the contract for. So the hedge fund profits from a collapse of Comex's business, even with contracts getting settled in cash. This is an end-game trade, and I'm speculating that indeed, that may be what we're seeing here.
It's currently looking like betting on the weather tomorrow. Comex has no control over the price. The fact it gets to be 300:1 and the price of gold has declined should tell you something.
Do you think Comex can be crashed that easily...do you think some billionaire/hedge fund couldn't afford 4-5 tonnes of gold ($160 million) if that's what you think it would take to crash Comex?
When they realize that the paper gold equals thier fiat money. Then our government shows up and steals all of ours. Now thats when things get interesting I bet but they gotta find it like in the 50s when people only turned in 50 percent
Even toilet paper is more valuable than the fraudulent paper gold market, which is not even paper, but digital.
I think I will now go buy some pixels......
When this mother crashes, everything will be liquidated, including gold. THAT will be the time to buy (if Etrade baby can get through to his shit-bag broker). PS: Bitcoin, bitchez.
when economy including commodities faceplant every one of these fuckers will be tripping over each other trying to get into bitcoin and they will fuel the king of all bullruns :)
the greatest wealth transfer in history is in progress
The first time we see and EMP, anywhere, your scenario is over.
yeah because i'm the only one running shielded equipment :rolleyes:
you dont think people smart enough to invent sensitive electronics are smart enough to invent ways to protect these? please....
When you look at the list of names that are behind Bitcoin, its obvious they are the same names that are behind our disastrous fiat system... Good luck with that.. Im looking for a form of sound money with no third parties to worry about.. Bitcoin is full of third parties willing to take or help the government take your Shit Coin from you. The ID required to sign up is like far from anonymous... its awful... VERY invasive. It has nothing to do with "freedom"... Bitcoin is about control. There is nothing unique, safe or even attractive about bitcoin other than its about to get pumped. ... Its just more shit...
Yep the powers that be had 2 choices shut bitcoin down or put the money in for control.
Fiat collapses then they are safe in bitcoin land.
you seem to misunderstand a lot about bitcoin not to mention the underlying technology (and i understand that, took me few days to understand what this technology is about and how it works)
there's no signup needed, just download a wallet (or compile your own after reviewing open source code), make some new bitcoin addresses and you're set
and while its not anonymous, its pseudonymous - if you mine your own coins then you can be 100% anonymous unless you reveal your info through non blockchain payment vectors
Thats one of its major problems.. Its not a simple currency... Its complex to understand... NOT GOOD... If people work to find a minecraft coin, each coin and the process to obtain each coin could be considered unique, but the overall process of playing minecraft to find/mine the coins is not unique at all... Anything that is virtual can be duplicated? UNLIKE GOLD... Im still not a true believer even though I own some... Ill take silver or gold any day in our current environment. Dig gold out of the ground and it represents work, period... VERY SIMPLE TO UNDERSTAND.
Not liking something because you don't understand it isn't really an argument.
Alls I need to know is JPM is involved and The FED likes it... You people are fucking scum.. I Know it will take off...Thats why I hate it because the scum of the earth bankers and elites want to use it. When the time comes I know exactly who to go after.
GOLD - the real metal - is long gone and paper has already been not only "liquidated" but killed, destroyed and run over...
Grid down then what bitches. Physical then now and later if you can find it
The so-called Comex Gold Cover Ratio is not correlated with gold price levels or directional movement.
Keith Weiner is an intelligent individual who brings much needed rationality to analyzing the precious metals markets. However, there is no correlation between his calculation of the "fundamental" price of gold and the actual price level or the directional movement of the actual price.
Syria has a lot of gold. A invasion could lower the price again.
A bigger war would be seriously bullish for gold.
But banks are controlling the market in such a flat out way and they control the price before they even get money into it, that as long as they control it, technicals don't matter.
Let's first see a few banks roll over and then gold gets it's shot.
I'd be willing to bet most if not all Syrian gold has probably been relocated to Russia by now.
I would bet the Assad clan loaded it up and moved it to Switzerland ages ago.
one wonders if the gold squeeze is about to begin
What squeeze? Nobody must buy something back, the Shorts just sell their Future SELL contracts!
A cyclical model of gold price suggests that the long basing process for gold prices is at an end and a secular bull should follow. Of course, all models are wrong, but some are useful.
gold pricing is so confounded by paper and sham registered holdings that any gold pricing model is about as useful as the Pope's nipples.
Gold in a downcycle for a few years, it will go up only after everyone has given up on it. So look for new lows.
Those (of us) who bought physical gold in recent years at $1400, $1600, etc. are rightly disgusted with the goldbugs such as kingworldnews.com and the many idiots on zh who have at least offered comic relief with their used-car salesman schtick. "Always A Good Time to Buy" worse than real estate agents and frankly guilty of fraud to a certain degree.
And I guess you're so smart that you predicted the beginning and end of every past bear and bull market in gold. You're a marvel to behold. Did you even read the article?
Complicit or just stupid?
Hedge fund managers know the casino is rigged and that the TPTB are going to keep this bass ackwards system afloat way longer than anyone thought possible. It's all gravy .... until it is not.
I LOVE the smell of fried trend-chasing yield-seeker in the morning...!
Smells like chicken...
Spoctor Din
Love the smell of hedge funds hitting the meat grinder,doubling down on their already disastorous performance to date.hand me the pop corn...
The recent performances of hedgies makes we wonder if this time will be different...
Are the chinese still paying way over spot for physical?
We need a Project Gold Mayhem....
start a gold run somehow.
In a way though, it's good for some of us. The people buying and selling the contracts may be making money but sooner or later there will be a large dump of the paper contracts, and a jump in oil - that's what the upcoming World War: Part 3 will do, yeah?
Gold cannot be allowed to go higher.
WITHOUT.
Exposing that the entire western financial system is a fraud.
Precious metal prices going lower incessantly for years in the teeth of steady or higher demand?...
Sales of billions of dollars worth of gold at the least liquid periods of the day in the space of minutes?...
Government regulators who say no crimes committed even when presented with the evidence?...
Factual complicity of the American Central Bank and its owner banks like JPM, Goldman Sachs, Citibank, Bank of America, Wells Fargo, etc?...
If gold ever goes up, America goes down.
Such are the stakes.
If those Futures contracts are not honored, there goes the full faith and credit of the United States.
( If ) WHEN gold ( ever ) goes up, America goes down.
There, fixed it for you ;)
And the disconcerting message here is, that is ALL
the PTBs are doing... fighting a "delaying" action.
Someone needs to take advantage of all those claims/ounce on alll the contracts by demanding delivery.
Yeah right, so we are waiting for legitimate traders to somehow reverse a totally manipulated market.
It can only go on as long as gold is delivered at those prices on the spot market.
Yes you are right, and local coin shops have endless physical gold at today's prices. Just picked up a 2016 Aussie kangaroo. The goldbugs would have everyone believe there's price-fixing to depress the price which would create a situation where there's no physical. Sorry, price can be manipulated to raise the price but it's just ludicrous to state the same manipulation lie FOUR YEARS in a row as price has nearly been cut in half and phyiscal supply is actually INCREASING. I've never seen so much supply in local shops, and I've been around the market for a long time.
Your same bullshit over and over again. Even education is hopeless with you.
Particularly:
-- Was the Banque de France's director of market operations, Alexandre Gautier, telling the truth when he told the London Bullion Market Association meeting in Rome in September 2013 that the bank is secretly trading gold for its own account and the accounts of other central banks "nearly on a daily basis"? (See: http://www.gata.org/node/13373.)
-- Is the Bank for International Settlements telling the truth when it maintains in its annual report that it does the same sort of secret trading on behalf of its member central banks, trading not only gold itself but also gold futures, options, and other derivatives? (See:http://www.gata.org/node/12717.)
-- Is the BIS sincere when it advertises that it undertakes secret interventions in the gold market for its members? (Seehttp://www.gata.org/node/11012.)
-- Was CME Group, which operates the major futures exchanges in the United States, telling the truth last year when it told the U.S. Commodity Futures Trading Commission that it is offering volume trading discounts to central banks for secretly trading all contracts on its exchanges? (See http://www.gata.org/node/14385.)
-- Was CME Group telling the truth last year when it told the U.S. Securities and Exchange commission that its customers include governments and central banks? (See http://www.gata.org/node/14411.)
-- If central banks are indeed doing so much secret trading in the gold market and other markets, what are their objectives and might this secret trading be intended to manipulate markets, support government currencies and bonds, and deceive and cheat investors who think that markets are free trading?
There is a lot more documentation suggesting as much here:
http://www.gata.org/node/14839
My organization would welcome an honest exchange with you about these things, as your commentaries about gold seem to overlook the most relevant "narrative" about the monetary metal and ignore a substantial and serious audience quite different from the one you seem to enjoy engaging with.
And I guess those same people ALSO manipulated gold UP to $1900. Didn't they?
Why aren't your complaining about all the upward manipulation?
If you believe that gold was "manipulated" higher in 2008 then you think there were no underlying reasons for it, our economy was sound at the time? The reason gold went up in 2008 is because people actually realized how bad the economy was and years later not much has changed... Only perception, but the structural workings of this economy have only gotten worse? People are lost. Gold is money everything else is Fake Bullshit this government is throwing at you.
Isnt it great the comment with all the sources gets down voted.. Because people dont want to believe the truth.. They only want the fantasy.
About 6 weeks ago it was only 250x so where did the 290x come from.
If people woke up they would realise this has to be market manipulation to suppress the price. A stupid policy when China / Russia is running a gold backed bank because they need cheap real gold. Keep stacking Russia & China while it is cheap. The more you have when you finally start to issue ETF's yours will be worth more with the gold to back it.
COMEX (all of CME actually) only accounts for about 20% of the world gold trade. Sort of difficult to manipulate all the world's gold when you only trade that little.
I don't know shit, but I have used silver as collateral and intend to do it again and again and again.
Admittedly, I'm a small player who can't really afford to play around with gold, though the price is getting to a point at which I'm seriously considering it. That damn Gold-Silver ratio being completely out-of-bounds keeps me in silver, though.
What was it that William O'Neill said, "buy what you understand."
I'm always bearish on paper gold, Does a Bear shit in the woods, Hey Hey Hey.
Does the pope like little boys?
Plenty of interest-paying treasuries that pay par upon maturity available through your favorite broker. I love mine, income plus BIG capital gains, and more to come :-))