Posted On: Friday, August 17, 2007
Gold and Dollar Market Summary
Author: Dan Norcini
Dear CIGAs,
Anyone who had any doubts that it was the bullion banks who were busy capping the gold price below $690 in the December contract can safely have those doubts dispelled after the release of today’s Commitments of Traders data. Last week (prior to this week’s debacle in gold on Thursday) December gold was struggling to get above the upper 680’s as strong selling emerged soaking up all available bids, preventing it from breaching overhead resistance. According to the COT data, funds were engaged in serious short covering as the market moved higher, dropping 9,523 of their shorts as compared to the liquidation of half that amount of longs by their fellows of 4,413. The commercials on the other hand were busy selling – the long side liquidated 1,421 of their longs but in what is MOST REVEALING, the commercial short side (the bullion banks) added 3,227 BRAND NEW SHORTS. Half of all the fund short covering was absorbed by these commercial sales.
The only category of traders that showed an increase in their positions last week were the spreaders (as usual when gold is moving down) and the spec shorts who added 83 new shorts, everyone else was liquidating except the bullion bank crowd.
Total open interest has dropped by approximately 8,000 contracts since Tuesday of this week so we have had some further liquidation since the cutoff day of this report but not nearly as much as I would have expected judging from the huge volume traded on Thursday. Some of that is due to the spreaders who are undoubtedly increasing their positions on the big sell off but I am curious as to how much short covering might be occurring by the bullion banks into the fund long liquidation. We have to wait another week to learn this unfortunately and by then anything could happen.
Dan - http://www.jsmineset.com/
linar 