Commodity Trading Advisors Are Holding Gold, Selling Oil, Silver, & Copper

There's been short covering by the banks on the silver side as the price came down $5 after trading over $32.75 at its peak this year. Although while the short position has been reduced from 43,000 contracts to 35,000 contracts over the past 3 weeks, it remains on the high side.

In gold, the bank short position has continued to increase even during the recent pullback, although the gold price has remained firmer. With December futures still trading at $2,444 on Thursday morning.

A recent Bank of America note also mentions changes in the positioning of the CTAs (commodity trading advisors):

¨Except for a relatively large Gold long, CTA positioningin commodities is quite short. Next week trend followers could be increasing shorts in Oil, Aluminum, [Silver] Copper, and Soybean Oil.¨

Goldfix analyst Vince Lanci mentions:

¨Anything that’s economic, the CTA’s are selling. They're worried about recession. But gold they’re holding. 

Over the past 5 days they’ve sold gold, but they didn’t get short gold. However they are getting short copper, silver, and oil now.

The CTAs matter because they’re indicative, if not predictive, of what the other funds do.¨

The market is still pricing in the volatility of the past week, and whether there’s going to be further market dysfunction from the unwinding of the Yen carry trade. And while the furor for immediate rate cuts following Monday’s crash in the Nikkei has died down, the market is still anticipating the beginning of the rate cutting cycle from the Fed.

So in the coming weeks we’ll see how the banks and funds impact the gold and silver market as it happens.

By: MilesFranklin.com & Arcadiaeconomics.com