ed steer of casey research discusses the commitment of traders:

As far as the Commitment of Traders, I must admit that I was not a happy camper. In silver, the bullion banks [Commercials] reduced their net short position by a very small 498 contracts...but in the Non-Commercial category, the tech funds reduced their long position by 479 contracts and actually went short another 1,665. This is an 'improvement' from last week's COT...and the numbers for silver represent almost 'the bottom of the barrel'...and a total clean-out of the speculators. Actually, I was expecting better...especially in the Commercial category. Ted Butler told me to take a pill. The full colour COT graphic is linked here.

In gold, Ted and I were in total agreement. It was negative. We were both expecting a modest improvement. Well...we didn't get it. In fact, there was a slight deterioration as the bullion banks [Commercials] went even shorter...and the speculators in the Non-Commercial category went longer. The bullion banks added 637 contracts to their net short position, while the speculators went net long an additional 2,932 contracts. Not what we wanted to see at all. The full colour COT graph for gold is linked here.

Without question, the COT numbers have improved since the cut-off on Tuesday at the close of trading. But along with that 'improvement' is the associated decline in the gold/silver price...as the speculators/tech funds in the Non-Commercial category puke up their longs as the bullion banks engineer the price lower; and either cover their own short positions...and/or go long themselves. As of Tuesday, the bullion banks were net short 18.2 million ounces of gold. Butler says that he can't remember the last time that the '8 or less' traders were net short such a huge amount of gold...but it was a very long time ago. This is not bullish.

As I've said off and on over the last few weeks, and Ted and I discussed this week, there is nothing standing in the way of the bullion banks driving the price down to below the 200-day moving average...which is currently at $862...and 'ringing the cash register' while they harvest all the tech longs they can. How far could the price theoretically go down? Don't know...but Ted figures that there's between 65-70,000 tech fund long contracts that could be harvested if JPMorgan and HSBC USA really put their minds to it. Here's the 3-year gold chart with both the 50-day and 200-day moving averages.

click to enlarge

There's no question in my mind [and Ted's] that if the bullion banks drive gold down, they will certainly hammer the hell of silver as well...as this is still the centre of the universe for them. But are they going to do it? Can they do it? Don't know, but the last four days of declining gold and silver prices [to new lows for this move] have turned me negative in the short term. What makes it even more difficult to call is the huge dichotomy that exists between the gold and silver COT reports at the moment. Silver is very bullish...almost wildly so...while gold is extremely bearish.

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