Gold & Silver COT Report 4/12/13:
Many writers were declaring a bottom for the silver slide after price rose from last Friday’s low of $26.57 and rose to $27.90 at Tuesday’s close.
They were wrong.
Almost all writers have previously declared $26 as the holy grail never to be broken downward again.
They were wrong.
How low can price go? I will repeat what Martin Armstrong has said we may see $23 and then if that, then $17 is possible.
Commercial longs added 3,213 contracts to their total and an additional 2,634 shorts to end the week with 43.16% of all open interest, a minor increase of 0.08% in their share of total open interest since last week, and now stand as a group at 89,620,000 ounces net short, which is a decrease of just under 3 million net short ounces from the previous week.
Large speculators added 291 longs and 522 more short contracts decreasing their net long position to 39,575,000 ounces, a decrease in their net long position of just over 1.1 million ounces from the prior week.
Small speculators sold off a total 1,457 long contracts and covered 1,109 short positions from their total for a net long position of 50,045,000 ounces a decrease of 1.74 million ounces net long from the prior week.
Many writers were declaring a bottom for the silver slide after price rose from last Friday’s low of $26.57 and rose to $27.90 at Tuesday’s close.
They were wrong.
Almost all writers have previously declared $26 as the holy grail never to be broken downward again.
They were wrong.
From the close on Tuesday to close Friday, price has been all downhill to the tune of more than $2 down. It is now Sunday evening and price has dropped $1.50 from the open to as low as $24.08
Large speculators and swap dealers were stunningly silent during the COT week as the real battle was between the producer merchant and small specs and it would appear the producer merchant had their way. Or at least it was a few small specs who decided to get out of the waterfall’s way.
How low can price go? I will repeat what Martin Armstrong has said we may see $23 and then if that then $17 is possible.
Last year, I shared a thought with the Doc that we could see a blowout to $16 and below, possibly a short term at $12. While that was meant to be a private thought to the Doc, he published it, and there were 300 some comments on it. I have an industry friend that told me last year the average cost of silver he calculated to be about $16 an ounce. SRSRocco has published he believes true cost is around $26 an ounce I believe and he has some good points. I tend to agree with the lower price because I believe that research is more accurate. A lot of silver production is as a by-product of zinc and copper and therefore the cost per ounce is negligible. Analysts shed great tears and stay up late nights trying to figure this out so they can bet on miners.
Could this be the big flip Jim Sinclair keeps talking about? It could be but it is important to remember with any rush to longs by the commercials there will be a huge amount of speculators rushing to longs as well and in futures there must be a short for every long and when the general public believes there is a bottom they are not going to buy shorts anymore. It is the large speculator hedge funds who are driving this effort to find a bottom and they paused their action last reporting period but my guess is since Friday morning they have resumed their short positioning efforts.
In gold, we have to go to the disaggregated commercials to see what was really going on last week and there we find the producer merchant closing positions and the swap dealers taking positions.
The gold swap dealers bought heavily in shorts last period and do not think for a minute they did not have an inkling that price was headed south in a big way and it has. At this past COT close price in gold was $1584 and here on Sunday evening it hit a low of $1422.
Can anybody spell P-R-O-F-I-T ???
Quick math on 8,477 contracts at 100 ounces each from $1548 where I think they bought them, let’s round to making $100 an ounce, comes to a rough $85 million.
Not a bad weekend’s work, aye?
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