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Silver and Gold Daily Bulletin/COT Review

Silver increased a mere $0.005 this past reporting period and gold wandered down $-9.60 but do you know how they got there?

Let's look under the hood...!

Here is the CME Daily Bulletin report from April 17th of last week:

CME Daily Bulletin report
Larger Image

If you decide you would like to monitor these reports on a daily basis to gain technical knowledge for reading on the COMEX, here is where you find the reports.

My report, each week, takes all the main points from the 5 days COT reporting period and summarizes all the important data, at a glance for the readers. Opening the daily bulletin above, you will see that May is the most active volume month (MAVM) for silver and July is the 2MAVM. This means that the spot price for silver is being determined by the summation of the contracts traded in May. Spot price is always determined in the MAVM. Notice that the 2MAVM, July, is two months after May. July will become the next MAVM near the end of this month or by the first of May. The current open Interest in May is 40,337. All of that open interest is soon to roll to July. What happens on the 1st of May is that May becomes the delivery month. All of this open interest can roll in a matter of days or on one single day. It just depends on how heated the battle is over the spot price and if, I believe, the commercial banks want to make an issue of it or let price rise a little only to take it down again soon after the first of the month. Notice the open interest in July is already 33,726 contracts. We will soon see somewhere around 70K contracts in the July futures month.

For gold, the sequence is different this month. Here, we clearly see that June is the MAVM. It appears on this report that December is the 2MAVM but it is not. This is just an odd day when the volume just happened to be larger than August, which has the higher open interest. If you were to view the next day's bulletin, I am sure you would see more volume in August. June has 233,690 contract in it and on the 1st of May almost all of those contracts are going to roll to next sequential month, which on this report is August. However, on the 1st of May, August contracts become July as the sequence is moved one month forward.

For the remainder of the month, refer to the table below, or click here.

I always list the overall open interest first so you can see the total open interest of the traders. My complete COT tables are at the bottom of the report and you can always find them at www.MarshallSwing.com for reference.

Looking at silver, we see that silver had quite the price moves during the week but finished only $-0.005 down. This is highly unusual and some suspect that silver is being held in position for the players from the East to get delivery in London. I am undecided about this but recognize that if silver were lower in price the players might want to take far more physical off the table in the London vaults. So the contrary question would be why are the commercials allowing the price to be held down if they know more is being gobbled up at the mid-$31 price levels? The answers are not clear. I am a believer that if the commercial banks want silver to be priced at $20 then they have the firepower to take the price there. They have such overwhelming positions by sheer volume they can manipulate price pretty much anywhere they want it. I have read Ted Butler say as much also when discussing high frequency trading. I take it one step further and say they have the power to do anything they want it is just a matter of what their hedged producer positions dictate for profit's sake.

If in fact the commercials have the mandate from the FED to suppress gold and silver price for reasons of not exposing the USD to being naked with no clothes, then they do in fact have an unlimited amount of money at their disposal to do so. And by that amount, I mean tens of billions of dollars just sitting there waiting to be implemented on a moment's notice to implement this suppression. Case in point, on February 19, 2008 the silver open interest short position by the commercials was 123,000 contracts. The term commercials is really two different groups. There are the swap dealers and the producer/merchants. It is the bullion banks of the producer/merchants who are the real short position holders. If you look at the bottom of this report, you will see I have broken out the commercials in disaggregated totals. Based on today's percentages with 71,230 commercial contracts short and the banks holding 56,755 shorts, the bankers side of that 2008 short position could well have been in the neighborhood of 98K+ short contracts. Though they have reduced their short position from 123K shorts to 71K shorts, it is painfully obvious they have an unlimited amount of money to do whatever they want.

Back to the daily bulletin. The silver total open interest change from the previous COT was -1,965. We see most of that open interest leaving the MAVM and longs being sold or shorts being covered as the rollover to July continues. One thing I want to being to your attention is the day of April 12th where silver rose $1.004. We see on that day the MAVM lost 126 contracts while the total volume was 46,624 contracts traded. At the end of the day, after tens of thousands of contracts have traded in the MAVM, the total OI change is a mere -126 contracts and a price rise of $1. The next day price drops $-1.135 and total OI change is -2988. Action like this is usually only seen when the 2MAVM is two months away from the MAVM and the rollover has to take place at the end of the month.

Let's go to gold for the same days and compare. On the 12th of April, gold goes up $20.30 and the next day drops $20.4. Here we see, on the price rise an addition of 1991 contracts to the MAVM and on the price fall the next day -2588 contracts leave the MAVM. This is normal trading we would expect to see because the rollover does not have occur at the end of the month. April 12th was the largest total volume day of the 5 day period but what I always tell traders is that volume means little to nothing as far as price. Tens of thousands of contracts trade every day by the day traders who have no intention of carrying those contracts to close and are only wanting a quick profit in a few hours trading. High frequency trading is another matter entirely. The bankers use HFT to obfuscate their intentions by causing the speculators to sell longs fearing a price move down or cover shorts fearing a price move up. Stops are usually triggered and the banks get their way. It is a very risky, tough business for the speculators.

Notice the gold COT at the bottom of the page. The large speculators were bounced out of -7648 contracts short. Most of those might have been out of the money after trading fees. The banks are very good at their game and are not going to let anyone play their short strategy. Look at the small silver shorts in the COT. They have 14,872 contracts and have added about 4000 of those in recent weeks. They are trying to play the bank's short game. Recently some large speculators tried this as well and got their heads handed to them on a platter. Reminder of the gold COT where the large specs lost 7648 contracts!

I leave you to the rest of the numbers!

See you next week,

Silver and Gold Chart

Silver Chart

Gold Chart

 

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