We can now put to rest the dumb argument that the gold and silver market is manipulated. I have spent a week waiting for the data that would shed some light on gold’s 2% loss April 21 as there was major selling at $1,270, which got goldbugs in a tizzy. As far as I can tell, there is no sign of “naked shorting” in the gold market. I knew that the idea of someone dumping $2 billion of gold into the market last week was utter nonsense and I was proved right. Not only was the idea of naked shorting spewed by a website that devotes itself to sensationalism to drive profits but it was totally in accurate. The Commodity Futures Trading Commission has just released its latest commitment of traders report. This report highlights the position changes among various market participants. First let’s take a look at the disaggregated report. In this report we only care about the money managers’ position; it basically represents hedge funds and institutional buyers. These are the only guys who would have enough weight to dump $2 billion in the market. Not only does it not show manipulation but it shows a healthy market as investors took profits after a significant rally. But don’t take my word for it let’s do the math. First I want to point out that the average closing gold price during the survey period from April 20 to 26 was $1,242.64 so this is the number I will use as the trade data is spread over five days. The data shows that there were no massive shorts, in fact short positions fell by 128 contracts – this is actually bullish for the market as this means short sellers have left. Almost $16 million in gold shorts left the market The price was driven lower as long positions fell by 2,185 contracts, this is actually pretty significant as each contract represents 100 ounces of gold and representing all most $272 million; however this is well shy of $2 billion. In total the gold market last week shrank by about $256 million as (and this is the important part) investors took profits. Unfortunately, it gets even worse the manipulation camp as the evidence continues to pile up against them. The CFCT’s second version of the data, its legacy report shows that the gold market actually expanded last week, as non-commercial short positions fell by a significant amount. Again we really only care about non-commercial positions because these represent the large speculators, the traders who have the most immediate weight in the marketplace. According to the data non-commercial shorts fell by 6,900 contracts or $857 million. Again this is bullish as short-traders gave up their losing positions. Long positions fell by 2,970 contracts or $369 million. The gold market actually expanded by $488 million as short-sellers had to buy contracts to exit their position. Finally, before I end this opinion piece I just wanted to highlight that this article is to dispute widespread 24-hour market manipulation that people have alleged has been happening for years. This isn’t about the benchmark manipulation that Deutsche Bank admitted to in its recent settlement. I agree that there is ample evidence that precious metals benchmarks have been manipulated among colluding banks; however, I think it is ridiculous to expand that argument to suggest that the entire market throughout the entire trading day is manipulated. These are two separate topics and to link them together is just nonsense.
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