Gold, Silver Speculative Longs Plunge To March 2009 Levels

Tyler Durden's picture

While the drop in speculative interest in various currencies made news last week, it is the turn of precious metals to be the key focus in this week's summary of the CFTC's Commitment of Traders report. As the chart below demonstrates, as of Thursday September 27, both gold and silver saw a massive plunge in the net long non-commercial interest (the cleanest proxy of how speculators are positioned in gold and silver). This is not surprising, following last Friday's CME hike in gold and silver margins, and this week's follow through action by the Shanghai Gold Exchange. The drop of 22,278 and 7,113 contracts, in gold and silver, to 127,801 and 15,425 contracts, respectively, brings the net total exposure to the lowest it has been since the fear of deflation was the only thing on everyone's mind in March of 2009. What is perplexing is that the net spec interest in silver is about half where it was on December 31, 2010 even with silver unchanged on the year, while only 56% of the long spec gold contracts from the beginning of the year remain even as gold is still up 15% YTD!

So while the drop is not unexpected, it is in fact beneficial for precious metal bulls as it means that the bulk of weak spec hands have evacuated the scene, and that any observations that gold and silver trades purely in tandem with spec interest are completely incorrect. This is also bad news for the CME as any additional margin hikes will have increasingly less impact. Lastly, it foes without saying that it would be delightfully ironic if the CFTC shows a net negative interest in non-commercial positions and gold is still be up for the year.

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tickhound's picture

When a zh'er prompts you to nbc sitcom comedy, assume its worth the trip...

Hilarity about the irs, gold, the printing press, excess... according to your own inclination.

Strike Back's picture

Oh come on it was funny.  Green.

diesheepledie's picture

Minutes of my life I will never get back. Fuck Off!

Real Estate Geek's picture

OMFG.  Thanks for the reminder why I don't have TV.

Stonecold's picture

Comercial longs increased and comercial shorts have decreased.  That is what I would follow.

reader2010's picture

NO Brainer. Just BTFD.

snowball777's picture

As if any other kind of decision making were available to you.

nope-1004's picture


Investing in this ponzi of a market is sheer stupidity.

Putting your faith in Geithner, total suicide.

Trusting quiver lip Benocide, complete self-depracation.

No one has any other choice.  The economy is being held up by an illusion, a dream, some kind of farce, "a change you can believe in".  What a joke of a president.

We are FORCED to invest in PM's because this ship is going down.  Anyone who wants preservation of their hard earned wealth has no other choice.  Therein lies the gov't rationale to bash metals down.


AldousHuxley's picture

government, police, congress, Fed all in the game to favor the banksters.



See: "Fuck the Fed" protest in Boston Fed by OccupyBoston


Never could have imagined, but it is happening.

Hephasteus's picture

It's funny because a controlled bullshit rebellion is bringing out the real deals.

reader2010's picture

Marc Faber once famously said that owning gold is about to be your own central banker. 

Thomas's picture

When asked why this is not 1981, one hedge fund manager noted that gold in 1981 was competing against an 8% real (inflation-adjusted) return on 30 year treasuries. That really seems to capture the spirit of my own bullishness. When there is something better than metals to own, I will swap them out.

reader2010's picture

If you're after cash flow, own some brothels instead because it's inflation/deflation-proof entertainment biz. But when it comes down to preservation of wealth,  you'd better off in king's money.

Fips_OnTheSpot's picture

I'll order the next kilo Wednesday - screw them. It's all paper manipulation.


Where's the 90tons Mexico bought *physically* - they got a BOND delivery. LOL! Squeeze physical?

1:55, bitchez!

agent default's picture

Do you have a link to that story?

Ahmeexnal's picture

Well, that certainly gives Mexico the right to nationalize gold/silver/copper mines....and get paid with gold to do so instead of having to pay.

DavidPierre's picture

Try to sort through the noise of market commentary to decide for yourself where this market is going. Read as much as you can from both the bear and bull camps, and dismiss much of what you read as misguided nonsense, but there are still many unknown unknowns that will determine the outcome for the intermediate trend in both gold and silver.

The bearish 'knowns' include:

* the existence of a hostile Cartel that is well-funded and taking deliberate action to suppress both metals

* a breakdown in the charts for both silver and the entire junior mining sector, plus the pending threat of tax loss selling set to commence shortly

* only a small segment of the overall market participation is interested in the PM sector, and these investors are demoralized and sentiment has been decimated

The bullish 'knowns' include:

* seasonal strength for the metals
* long term chart for both gold and silver indicating the bull market
remains intact * inflationary pressures remain in effect and money printing continues unabated
* current low price regime for the metals will encourage further bullion buying worldwide
* CB buying has been increasing

Now there are questions that make a great deal of difference in terms of how the above factors will impact the performance for the sector. For example, read reports from many smaller bullion sellers that business is brisk and they are experiencing record sales for gold and silver, with few retail sellers in their shops. This is also confirmed by larger vendors like Sprott Precious Metals. Asian bullion demand has also been very strong. So assume that as this bullion is sold from the shops, these vendors are buying back inventory in bulk.

Silver stands out in particular because there are no CB reserves of silver that can be tapped to deliver against this demand. Where is this bullion coming from to supply the strong demand at these price levels? An estimate is that we are talking about tens of millions of ounces of silver bullion that has been accumulated during this dip worldwide, so that should make a dent even in the ridiculous paper trading scam at the LBMA and Comex.

They raiding the inventory of the ETFs and allocated bullion pools to supply this metal to a relentless market even as the prices have been crushed!

{On a personal note, I just received confirmation that my bullion order from the first day of the big selloff will not be shipped until the week of October 17th. This from a reputable dealer I have purchased from for several years. I paid in full for the metal and was told it was in stock when I bought and now I am back on a waiting list it seems. This appears very similar to 2008 when I had to wait several weeks to get any order filled and could not find a dealer anywhere that had gold or silver in stock for immediate shipment.}

 Indeed vendors are back ordered and the supplies have been coming from ETF inventories, at best this will only delay the demand curve. That metal still must be purchased and that buying pressure cannot be offset from a flood of paper promises that are unbacked by real metal.

The big question to resolve is what happened to the CB buyers? Why are China, Russia standing back to allow for this smackdown?

Assume they were covertly contacted and advised that a major intervention was coming and that they wisely will stand down and wait for lower price levels to begin buying again.  But is there any extra supply coming to market from this intervention?

 It is almost entirely paper contracts dumped at opportune windows of low market volume to trigger price collapse. Add in the collective buying pressure from smaller bullion retailers and and bigger buys from CBs. The spot market should be recovering sharply on physical demand but so far it has not happened. How much extra metal will be around for large scale buying when the CBs get back into the market? Where is it going to come from? And what advantage is there to allow the price to be smashed if the resumption of buying just runs the price right back up again in short order?

Do not think China, Russia, and others have any love for western nations that are in duress. Do not think they wish to support corrupt bullion banks and help them unwind manipulative derivative positions in the metals. What promises could have been made to get these nations on board for this planned meltdown? When will they return to the markets and start buying?

There is one other unknown in all of this. It was reported that Carlos Slim sold silver hedges for tens of millions of ounces at around the $25 level last year. I have not seen much commentary on this lately, but if the counterparty for that hedging was JPM? And as the bullion is delivered against those hedges, would this not amount to a war chest of strategic bullion that could be dumped as a massive order of physical silver to collapse the market and then allow for the paper contracts to be closed out as spec longs sell into this down wave? This could account for some of the unknowns  listed above. It would also neatly answer why the floor for this correction came in just above the $25 price range.

At this point remain focused on the long term, and remain committed to buying the dips as they are presented.

Discount the bubble nonsense, be not overly concerned that the long term top is already in.

Perhaps we have many years of decline ahead. It is a possibility but all of the evidence suggests otherwise. Bullion inventory is approaching a critical low and mine supply has not been able to keep up. Even as hedging contracts are delivered to private counter parties, that bullion is removed from the market and buyers must compete that much harder for the remaining mine supply. At some point that aggressive buying must translate into higher prices, and if prices are contained through the issuance of fraudulent paper contracts, then eventually a delivery failure must occur. There is no way out of this shortage as long as the demand for bullion runs higher than mine supply. And all of the evidence supports this conclusion. 

 Wait patiently and continue buying.

Confused's picture

Thanks for taking the time. 

Pegasus Muse's picture

Excellent comments from le propriétaire. 

Some more color on the state of the retail physical markets, PM technical analysis, and review of the latest COT Report check out the Weekly Metals Wrap at KingWorldNews:

And for some good insights from a guy with four decades experience in the Precious Metals & Miners listen to John Hathaway:

He talks about a group of companies will likely be the high dividend paying “utilities” of the future.


mjk0259's picture

Maybe the vendors are betting it will go down and delaying shipment to increase their profits

austin0388's picture

Some good comments, DavidPierre, but your statement "* only a small segment of the overall market participation is interested in the PM sector, and these investors are demoralized and sentiment has been decimated" should DEFINITLY be in the Bullish knowns list.

Motley Fool's picture

" the existence of a hostile Cartel that is well-funded and taking deliberate action to suppress both metals"

I would argue that this is long term bullish as well.

nope-1004's picture

" the existence of a hostile Cartel that is well-funded and taking deliberate action to suppress both metals"

This statement, while true, is a direct cause of your other two points, being demoralization and less investment in PM's.  Whether it is bearish or bullish, I think it is the only statement that is true, because the other two are a RESULT of the first.  They aren't independent 'bearish' statements without #1 being the cause.


Bendromeda Strain's picture

Eric King's weekly wrap w/ CMI shows that physical buyers are far from demoralized and are actually active to beat the anticipated premium increases. Paper specs demoralized? So sorry.

Smiddywesson's picture

DavidPierre touched on a point I would like to, once again, emphasize.  

I have to laugh at all the people who continue to say Russia will do this, or China will do that, or Germany will do xyz.  The only reason they have been able to ride this leperous three legged dehydrated donkey so far across the blasted financial wasteland that has existed since BearSterns and Leahman is because ALL the central banks are on the same sheet of music.  China obviously doesn't like getting hosed.  They are angry and they are opening their own exchanges and playing the propaganda game, but they HAVE to be playing along with the kick the can game or gold would have spiked.  Any major player could bring this charade to an end by panicked buying or just issuing alarming statements.  And yet, they haven't.

We are going to continue to kick the can and suppress gold and silver prices as long as we can.  No matter how much we have to reluctantly print, no matter how much financial destruction we create, kicking the can is the Prime Directive.  That much is clear.  It is also clear that when the end nears, all of the major gold vendors will seize up and delay delivering product.  During this delay, they will assess how much richer they are becoming.  If that is an exponential climb, they will shutter their windows and will not deliver.  Anyone who hasn't acquired a good portion of the PMs they require to protect their wealth is playing with fire.  You can't time this collapse.  It can come tonight or two years from now.   

prole's picture

or a hundred and two years from now...

Smiddywesson's picture

The system is too unstable to last more than a handful of years.  There is a point at which the central banks deem they have enough gold vs. the destruction of their wealth via outstanding loans being paid back in debased currencies.  They are losing money on kicking the can and debasing the currency being paid to them.  They are  making money on the gold they are acquiring (assuming they will ramp the price of gold in the future) plus paying off their own debts in debased currency.  At some point, they will pass over the line into solvency and halt what they are doing and announce a gold referrenced system.  Until then, they will keep buying gold while trying to convince you it is very risky and and a bad investment. 

macholatte's picture

If you delete the speculative interest in a commodity and look only at its value in terms of USD that have inflated (maybe this is not possible) then you get the real current value of that commodity net of supply/demand. In Other words, is the base value of gold relative to the currently inflated USD really around $1600 or $600? Or is the Big Mac really the best indicator of current value?

the Big Mac index

Central Bankster's picture


The measurement of GDP is hard to quantify in "real" terms.   This leads to problems in using it as a baseline for value of money.  In addition to this problem, we are not factoring for the future drag on real GDP from the curent unsustainable debts.  IE, is the economy as we measure it, sustainable?



GeneMarchbanks's picture

You cannot stop this gold bull.

midtowng's picture

When you hike margins (2 or 3 times) you chase out the weak speculators. Unless they drop margins (unlikely) future margin hikes won't have much effect.

I'm feeling a little bit smart for a change. I took profits on my gold holdings 2-3 weeks ago, and just started buying more gold and gold stocks on Friday. Hope I guessed something near the bottom.

Melin's picture

good job.  I did just about the opposite.  Went dbl lng gold and silver about 3 weeks ago.  I dont' sell the physical and I haven't sold the etfs.  just blade runnin' downward and crossing my fingers.  Pretty dopey prolly.  

7bit's picture

You should have looked at a chart before you bought. In order to make profits you are supposed to buy low and sell high, not the other way around.

mayhem_korner's picture


I'm feeling a little bit smart for a change.

Based on what you're doing, I'd say that's "transitory."  You're still viewing PMs as a trading asset, not a wealth store.  If you view gold as a store of wealth, you would not be worrying about a "bottom" and would not be buying and selling paper. 

Not sure you are in the same stadium with most PM holders here.

MFL8240's picture

Exactly as the criminals planned it.  Great job Ben.  At least you suceeded at something.

Motley Fool's picture

That is perplexing, but it is only paper.

DosZap's picture

For those here in Denial.......................on paying taxes on PM sales.

Rules for Brokers and Other Taxpayers
  • In Publication 544, "Sales and Other Dispositions of Assets," the IRS states that gold is a capital asset when held by a taxpayer. Any gain or loss that the individual sustains when he sells the gold is regarded as a capital gain or loss. Taxpayers are required to report these transactions on Form 1099, where gains are reported as ordinary income. Taxes are paid to the federal government based on how long the gold was held, the initial price when the gold coins were bought and the sale price when the gold was sold. At the same time, brokers who sell gold coins are not required to report the sales to the federal government when fewer than 25 gold coins are sold in a single transaction. But, of course, coin dealers have been expected to report the amount they made from the sale as ordinary business income. The exact wording of the broker regulations is contained in the sales of precious metals section of the IRS Form 1099-B instructions.

Read more: What Are IRS Reporting Rules About Sale of Gold Coins? |

Fips_OnTheSpot's picture

Sweet - in Germany it's tax-free for gold. For silver it's 7% VAT (coins, 19% on bullion) *at buying*.

And that's it.

Ahmeexnal's picture

When TSHTF, people who were smart enough to keep their wealth in gold/silver instead of fiat euro-kaiser-konfetti in Germany will be asked to please board a train and only pack a couple suitcases with them.
That's how the german power elite confiscated gold last time around.

Motley Fool's picture

Simple workaround. Buy and don't sell. At least untill the US government breaks down. Shouldn't be too long now. :P

Long-John-Silver's picture

or have an unfortunate boating accident and lose all your Gold and Silver when it sank.

Fips_OnTheSpot's picture

How so? I buy physical OTC (read: anonymous) I fail to see any sinking there.

DosZap's picture


I buy OTC occasionally  also, and unless your buying only one or two ounces, your going to fill out paperwork for $10k's worth.

Name,addy,and SS#.

Motley Fool's picture

yeah well. buy 9k worth. walk out the door, walk back in, reintroduce yourself. wash,rinse, repeat. :P

DosZap's picture


Sorry No Workee that way.....................

They have a little rule called STACKING.

Doing as you suggest would likely/could likely cost you alll you own, and a stretch in the big house.

Motley Fool's picture

Well. Fuck em. How would that work anyway?

I suppose if one has to one could buy from multiple dealers?

WmMcK's picture

Physical PM's only. Buy with FRN's (<10 K/). No name/SSN.
Make a list of every coin dealer in ~50 mile radius.
OK so far -- let's minimize the FUD.

darteaus's picture

I've never had to produce ID.

-- John Smith

darteaus's picture

Don't you have family? Stack them at the counter with your money.