Commitments of Traders Review: Gold, Silver, Oil, Copper

By Philip Dunham

Gold

After falling from around 1,065 in late October, gold prices surged, flirting with 1,100 due to news the Reserve Bank of India purchased 200 tonnes of gold from the IMF. Open interest increased by 35,649. Producers/consumers increased long positions by 5,290, shorts by 9,360. Swap dealers increased longs by 879, shorts by 3,506. Managed Money increased longs most substantially, by 15,057 and shorts by 2,269. Non reportable traders reduced both long and shorts positions, each by roughly 16,500. Technically, prices are again in overbought territory for the third time since November. In addition, volume has been decreasing. Gold is overdue for a correction and silver may provide further confirmation. That said, gold will be more resilient than silver when a correction materializes.

Silver

The most significant development in silver COT (commitments of traders) positioning was a 4,000 contract reduction in managed money longs, 1,108 contract increase in producer/consumer longs, 1,974 contract decrease in producer/consumer shorts and an across the board reduction in other reportable and non commercial traders positions by approximately 10,00 contracts.

Silver moved higher with gold following the Reserve Bank of India’s gold purchase. Based on COT positioning, the November 3rd move squeezed weak shorts. Silver has developed a rather ominous chart since September setting a marginally higher high slightly below 18.00 in October and looking to test that high this week. 17.50 resistance was broken next resistance is 18.00. Metals are sending mixed signals. On one hand metals have been relatively resilient. On the other, technicals are breaking down and silver appears to be setting up for a correction. If prices stall at current levels between 17.50-18.00, the likelihood of a substantial correction will increase. But if 18.00 is cleared, direction would be less clear, because silver, and gold as well, lack catalysts to stage a sustained move much higher.

Copper

Prices have traded sideways at support of 2.90-2.95 since mid October after briefly crossing 3.00. COT data this week did not yield any significant insight. As long as prices remain above 2.90, the uptrend can be considered intact. As long as the global growth outlook remains unchanged from current expectations, copper should e driven by supply related factors. Currently those factors are still mixed.

Crude Oil

Similar to copper, crude has traded sideways to down since mid October. Open interest decreased by 24,917 contracts. All groups reduced positions except producers/consumers which increased long and short positions by 21,045 and 30,691 respectively. All other groups reduced long and short positions by 46,431 and 56,077 respectively. Managed money reduced longs relatively more than shorts, and non reporting traders reduced shorts by 2.6 to 1. Hurricane Ida is approaching the gulf coast as of this weekend but due to cool water in the northern gulf, was downgraded to category one and continues to weaken. According to Platts some BP gulf oil and gas production was temporarily shut down, albeit not a significant amount. Monday crude is up by nearly 3%.

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Disclosure: None