Fund Manager: The Record Speculator Short Position In COMEX Gold Is Misleading

by Dave Kranzler of Investment Research Dynamics

I felt compelled to clarify the commentary out “there” discussing the non-commercial short position in gold.  An interviewee on one of the widely viewed precious metals and economic websites referenced the record “speculator” short position in Comex gold futures.

In my opinion this is misleading because it is the “managed money” segment of the non-commercial “speculator” trader category in the CFTC’s COT report that encompasses the entire net short position (click image to enlarge):

The image above shows the latest disaggregated COT report. The disaggregated COT report debuted in October 2009.  Disaggregated data was made available going back to June 13, 2006. Previously the report was separated into “Commericials, large speculators and non-reportables.” The large speculators were the “managed money and other reportables.” The “managed money” is primarily hedge funds. No one outside of the Comex operators can say exactly what the “other reportable” category is (many attempts have been made to get clarification over the years). It’s likely larger pools of non-institutional capital like family office money and wealthy foundations. The “non-reportable” category is retail accounts.

I will note that when JP Morgan was caught and fined for mis-reporting the Comex silver futures trades it clears, the bank was caught stuffing trades that belonged in the “swap dealer” account into the “other reportable” account.

This clarification is important to point out for two reasons. First, as you can see, in the non-commercial trader accounts,  the hedge funds comprise the entire amount of the non-commercial/non-bank net short position. The Other Reportables and Non-Reportables are net long. In fact, the Other Reportables increased its net long position last week.

Second, not only is the hedge fund net short position at a record level, the “Swap Dealer” (i.e. the banks) account is close to an all-time net long position at 31,259 contracts. Based on the historical disaggregated spreadsheet maintained by my business partner, the only time the bank net long position was larger was a two-week period in December 2015 (12/15 – 32,550 and 12/22 – 31,692) and a two-week period in July 2017.  However, during the July 2017 period, when the swap dealers were net long at a record level, it was also accompanied by a net long position by the hedge funds.   Overall the commercial category in mid-July 2017 was still short over 70,000 contracts (the “producer/merchant/processor/user” commercial category includes bank positions that are theoretically not used to hedge).

I wanted to clarify the issue with the COT report because it’s important to note that the banks are almost always right with their gold futures positioning and the hedge funds are almost always wrong. The implication of this is obvious.

I discuss the significance of the net long/net short positioning by the banks and the hedge funds in Comex gold futures with Trevor Hall of Clear Creek Digital in our collaborative project, Mining Stock Daily (click on image below to listen – this was recorded before Friday’s COT report was released):

Mining Stock Daily can also be accessed using Amazon Alexa, Google podcasts and Apple i-Tunes.

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