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 (11)
No. 1-11

The Gold bugs have been using this excuse, along with QE and others to justify why they've been wrong for 6 yrs. When gold finally does lift off with the collapse of confidence, will they be complaining about the normal manipulations for profit? Manipulators can't change the trend.

Mike Mish Shedlock
Mike Mish Shedlock


I do not believe manipulators can change the trend either. They can goose it, but not change it.


Exactly, blacklisted. It is, indeed, possible for a manipulator to sell, pushing the price lower, however, he can't hold that position forever. In time he must buy it back, which produces an equal and opposite effect.

Hearing this constant claim gets tedious, but it's actually much, much worse than that. The constant claim that gold is controlled by price manipulators has to hurt the price of gold. If the price of gold is actually controlled by manipulators, no sane person who is acting rationally would ever even consider owning it.


Net positions seem to be fairly balanced, similar to a purely hedged market neutral strategy. You wouldn't expect to see wild price swings under such circumstances. I'm wondering if the COT is picking up everyone's activity. For instance, is central bank activity included in the report, or could they have arranged for an exemption from the report? Sure its a very cynical view, but, hey, its the times we live in.