Positioning Of The Paper Gold Comex Comittment of Traders

The CoT data for gold had the positioning as of last Tuesday. POG was $1,420 at that point. Managed money continued to modestly reduce long positions to the lowest level since 2008. But the big story was the continued reduction in the position of producers, who have now only hedged 27,066 contracts, or 2.706 million ounces. This represents a substantial reduction off of last week’s 37,463 contracts. In other words, producers in general — or perhaps one or two large producers — were in the market during the week buying and closing out roughly 1.04 million ounces of gold hedges. 

This tells us the gold producers have little future production to deliver to the paper Comex market. Last October, they had over 20 million ounces hedged. Most of the 2.706 million ounces still hedged is spread out over months, if not years. It may also suggest that gold producers prefer to sell their gold directly elsewhere and bypass the Comex altogether as a legitimate place to conduct business.  Further, since there is no price discovery there, and since prices are higher in the physical market why deliver to the Comex warehouse at all? That in itself would be a huge event. The commercial and producer indicator on its own is very bullish, but this seems especially so because of its challenge to the paper gold Comex “market.”

Chart source: BarChart.com

David Kranzler of the Golden Truth had some important commentary at Seeking Alpha concerning the misinformation campaign about gold, in this case the actions of George Soros. Incredibly, Soros in 1Q got even more aggressive (too early) on gold shares and was simply reallocating out of GLD into GDX and GDXJ. But that’s not how the news stories read.

When I woke up this morning, I turned on Bloomberg News to catch the news headlines and see where the futures were in all the markets and I saw a news scroll headline proclaiming that Soros and John Paulson had unloaded gold and mining stocks during Q1. As it turns it out, the news headline scroll was egregiously misleading  [Bloomberg: Soros Dumps Gold].

“I went to my computer to pull up the actual news story and discovered that Soros had indeed sold a little of his GLD position, but he moved several times the amount of GLD he sold into what is now a $239 million bet on mining shares. Not only did he buy $25 million in call options on GDXJ, the junior mining stock ETF, but he kept a $32 million stake in individual mining shares and added 1.1 million shares of GDX, the gold mining stock ETF. In fact, with GLD he only sold down 70,000 shares of his original 600,000 share position: Soros SEC 13f filing.

“If you read through this entire Bloomberg News report, you’ll see that the Bloomberg TV headline scroll was completely misleading, further demonstrating the negative sentiment and bias toward gold and mining stocks that is all-pervasive on Wall Street right now:

Note:  Saturday I will cover the Gold CoT position here as a free report and followup for subscribers with comments on the GLD ETF, the June Comex end-of-contract roll and the Shanghai Gold Exchange.