Investigating the Claim "Speculative Shorts Driving Gold Lower"

Are speculative shorts "driving or contributing" to the move lower in gold? Let's investigate.

The Commitment of Traders (COT) reports is published every Friday as of the previous Tuesday. The COT report shows long and short positions.

My lead-in chart plots the price of gold as of the close of every Tuesday starting June 12.

The big specs are typically hedge funds and pension plans while the commercials are gold producers and market makers. The producers are always short, while the market makers are hedgers who take the other side of the trades.

Now let's look at changes in open interest.

Gold Open Interest Positions

There are at least two problems with the gold short theory.

From June 26 to July 3 the price of gold rose by $5.30. Yet, the large spec shorts increased from 118,446 contracts to 132,156 contracts. The small specs increased shorts from 32,129 to 36,276 contracts. That's a total short increase of 17,857 contracts. The open interest rose by 25,591contracts (majority short).

From July 3 to July 10, the price of gold declined by $15.30 while the long position increased by 6,083 contracts and the short position decreased by 1,161 contracts. Open interest increased by 9,424 contracts (majority long).

I have seen the gold short theory posted before, but it doesn't add up. We can check again on Friday when we have the report for July 17.

Comments
No. 1-11
pgp
pgp

For the first time in a while gold is down against all currencies. Normally the USD-centric views on gold overlook USD changes. However the price of oil just tanked and of course gold generally follows oil price, since it takes fossil fuel to produce bullion. Yes its paper gold but it is still influenced by the basic rule of commodities - they're intrinsically linked to oil. The analysts falling over themselves for their moment in the spotlight are as usual spouting rubbish. Inevitably they are the mouthpieces that manipulate sentiment so that the commercial traders can profit from the overshoot.

RobinBanks
RobinBanks

He should ask why Russia has debt to gdp of 10% and a tax rate of 13%. It's called seeing your country being crushed by socialism and neoliberalism and doing something about it. He should ask why Russia is buying physical gold and not paper.

Carl_R
Carl_R

Amazing to think that the single Russian ship which sunk 113 years ago, now being salvaged, contains 1/10 as much gold as all the gold held by Russia today.

Stuki
Stuki

Now let's hope Putin really has the influence over Trump the ditto heads insists he has, and straightens out our Clown in Chief's misguided belief that there is something, anything whatsoever, positive about having money printed into thin air by a bunch of privileged halfwits.

Stories