Managed Money Short Positions: Predicting Short Squeezes in Gold and Silver

What do we look at when we want to know if there will be a short squeeze to the upside in gold and silver?

Well, we look at the managed money short positions. These are the hedge funds and commodity trading advisors (CTA’s). If these people go short, then the price goes down and when the get long again, the price goes up.

You can find all info on the COT report site.

For example, the chart (May 28 2014) below indicates that there are a record amount of silver shorts at this moment. Each peak in the blue chart marks a bottom in silver price. So at least we will see some sort of price spike in the coming weeks in silver, when these hedge funds go long again from a record short positioning. This chart confirms to me that silver is cheap at this moment and it confirms why the premiums on silver are so high at this moment, while U.S. mint sales of silver outstrip the gold sales.

Managed money short positions silver

You can always find the latest numbers here. The latest managed money short number is 38453 shorts, which is a record high number of silver shorts, even higher than in the chart above. There is potential for a good short squeeze.

Silver COT report

As for gold, the last chart I could find is from March 2014. But you can always find the latest numbers here.

Managed Money Short Positions Gold

The latest number for the managed money gold shorts is 53577. If you compare that to the chart above, that’s also a pretty high number. So again, there is a potential for a short squeeze a few weeks from now.

Gold COT report

So now you will have another report to look at. This will at least give you the tools necessary to predict sudden gold/silver price spikes.

Silver About to Reverse in Price

According to the COT report for silver, the open interest in silver came down dramatically this week:
http://katchum.blogspot.be/2013/05/cot-report-goldsilver.html

That means the silver price is likely to reverse to the upside. Also, commercial shorts have almost all been covered now.

According to the COMEX report for silver, J.P. Morgan doubled its registered inventories from eligible silver, meaning that total silver stock is likely to go down. This confirms the COT report’s drop in open interest.
http://katchum.blogspot.be/2013/04/gold-and-silver-comex-stock.html

ADP Report Vs. Unemployment Rate

Today we also found the ADP jobs numbers for the month of January 2013 and it came out to 192000 jobs. This is pretty good, but if you look at the trendline on Chart 1 we are still going down.

Job growth isn’t keeping up with the rise in population, we need to have at least a payroll number above 200000 to reduce the unemployment rate.

The declining unemployment rate (blue dots) is not to be trusted because if it were real, the red bars would be going up, not down.

Chart 1: ADP numbers Vs. Unemployment

Nice Site to get Current COT Reports

I always thought by myself, how come the COT site doesn’t give current charts and current tables here. I mean, those numbers are 2 months old… Because of that, I didn’t have current information. But we have a breakthrough here.

Thanks to Dieuwer from Seekingalpha, who pointed out I make a lot of mistakes, I now have a very interesting site to share. Namely: http://www.cotpricecharts.com/commitmentscurrent/

On that site, the two most important ones for me are the one for silver/gold and the other for 10 year bonds.

Gold: http://snalaska.com/cot/current/charts/GC.png
Silver: http://snalaska.com/cot/current/charts/SI.png
10 year bonds: http://snalaska.com/cot/current/charts/TY.png

Let’s talk about the silver one first. Chart 1 gives us immediately the commercial interest. And we see that today the commercials are pretty short silver. That means that silver will be weak at this time.

Once the commercials start to become long again (purple chart goes up), like in July of 2012, then you need to start buying silver. And indeed, when you look at the silver price in July 2012, it bottomed out. So this COT site, is a must, to monitor each week.

Chart 1: Silver Open Interest

Chart 2: Silver price

As for the 10 year bonds, Chart 3 gives us an idea what the commercials are doing now. They have gone long just recently. You can see the purple chart has gone positive the previous week. How to read this chart? When the purple chart is very positive, with many commercials buying bonds, like in April 2012, then you should buy bonds. When commercials are short, like in October-December 2012, you should sell bonds.
And it works like candy…

Chart 3: 10 Year Treasuries Open Interest

Chart 4: 10 Year Treasury Yields

It’s like Dieuwer has just put money in my pocket with these charts!

Copper Price VS. Contango Report

I decided to start monitoring the contango-backwardation curve of copper (Chart 1). In a previous article I noted a pretty significant correlation between contango and price of copper.

We see that the negative correlation between copper price and 1 yr futures contango is still existing. But it’s difficult to predict the price of copper, because the contango curve and the price curve are almost exactly following each other. We could say we almost have a 100% correlation here.

But, something weird happened on 14 May 2012 though, where the copper price was in steep backwardation, but the copper price didn’t go up… So there still are discrepancies in this correlation.

Let’s see if this monitoring of the copper contango will bring new ideas.

Chart 1: Copper Price-Contango (USD/lb)