COMEX Gold Liquidation
75,332 long contracts liquidated in just 23 trading days. That is what the past five COT reports and Open Interest reports tell us. In reality however, the true range of days in which a historic long liquidation took place was actually 17 trading days. It started on May 12 when open interest was 358,247 and may have ended today, when open interest was 282,915 contracts. The COT data just as well tells us that the long contracts liquidated in this time frame were sell orders from two specific trading groups, that my friend explains the sell off in gold. No need to blame a phantom entity or group thereof; it is as plain as day, 75,332 long contracts were liquidated in 17 trading days at COMEX while the active contract price fell from $732 to $624 an ounce. The COT reports clearly point to the Non-Commercial and Non-Reportable traders as the only traders at COMEX having sold out of significant long contracts. If you know a single thing about trading or price action, you know that only a sell order can cause prices to decline. The sell order that I speak of must come in the form of one that had been previously bought as prices were rising, not one that was a short sell as prices were increasing. This fact is proven true as we see Commercial Hedgers pile on short positions to no end as prices rise in the face of every short sell they accumulate.
The COT reports contain very specific data concerning the timing of short sellers and the timing of long sellers. It is conclusive and irrefutable as to who was selling when prices began to decline. The Commercials, at one point had only sold 1,651 long contracts and that was well after the price decline had started. The 5/30/06 COT report reveals that just the opposite of what one might expect (from the so-called "Cartel" Commercials) occurred, the Commercials became buyers of gold at what may have been the low last week near $620. This heavy buying activity (17,883 long contracts) began on 6/02/06 and is a frequent and almost standard action taken by the Commercials at interim lows in the gold market.
This brings me to another thought on the "Cartel" conspiracy theory. For one thing, everyone that claims prices are being suppressed in the gold market, say the Commercials are the ones doing it. The positions held, and actions taken by this group prove just the opposite, the Commercials want higher prices for their product. This fact lends to the conclusion that if anyone conspires to cause a price decline, it would have to be a Non-Commercial Trader that began liquidating his long positions at a very fast pace. Knowing that this is true, how can anyone lend credibility to a "Conspiracy Theorist" that does not know the Conspirators must be operating from a completely different group than those he accuses? Enough of this conspiracy nonsense fellow traders, let's get our heads on straight and know this; the gold price reached an interim high and a ton of Traders realized they bought the high. They panicked and ran from their positions causing a major price decline. There is no doubt that the Trend Chasers (Non-Commercial and Non-Reportable Traders) could do as they had back in the 1990's and go net short for a few years so I watch these manic players like a hawk. You can bet when they move, I let it be known at dowtheoryproject.com by either discussing their movements or just yelling something like .....Run!
Perhaps the direction in which you run next may be determined by the information I provide in my next report at the Dow Theory project.....ever wonder what the Bankers are up to?