Buy Gold, Silver Time After Speculators Reduce Longs and Banks Reduce Shorts

– Gold and silver COT suggests bottoming and price rally coming

– Speculators cut way back on long positions and added to short bets

– Commercials/banks significantly reduced short positions

– Commercial net short position saw biggest one-week decline in COMEX history

– ‘Big 4’ commercial traders decreased their short positions by 28,800 contracts

– Seasonally, January is generally a good month to own gold (see table)

– “If history is still reliable, January will be a great month to own precious metals”

Have you found the gold price in the last few months to be particularly boring? Well, fear not as it looks like it might all be about to take a turn upwards. Last Friday’s Commitment of Traders (COT) report signaled we are close to bottoming and suggest that both gold and silver should have a positive January and Q1, 2018.

As John Rubino wrote in his latest note, ‘gold futures traders have finally started behaving “normally.”’ This simply means that speculators are finally beginning to cut back on long bets whilst commercials and large bullion banks, the “smart money” and the “inside money” have reduced their shorts dramatically.

This was seen in gold and also in silver, the industrial, technological precious metal. Historically when commercial and speculator positions are brought into balance then this has proven to be bullish for the precious metals.

Previously peaks in net commercial short interest have often happened alongside sell-offs, subsequently valleys in commercial short interest have almost always coincided with nearby rises in price. This could be a positive indicator for the next few months in both gold and silver prices.

Silver: short 181 days of world silver production

According to Ed Steer:

“In silver, the Commercial net short position cratered by an eye-watering 26,721 contracts, or 133.6 million troy ounces of paper silver.  That is, without doubt, the biggest one-week decline in COMEX history. They arrived at that number by adding 9,701 long contracts, plus they reduced their short position by an incredible 17,020 contracts – and the sum of those two numbers is the change for the reporting week…the Big 4 traders reduced their short position by about 6,400 contracts – and the ‘5 through 8’ large traders reduced their short position by around 4,700 contracts… the 36-odd small Commercial traders other than the Big 8, added approximately 15,600 contracts to their long position.”

As you can see from the chart at the top, the Big 8 commercial trader are now net short 439.8 million troy ounces of paper silver. This is equal to 181 days of world silver production or about 439.8 million troy ounces of paper silver held short by the Big 8.

“The two largest silver shorts on Planet Earth-JP Morgan and Canada’s Scotiabank-are short about 92 days of world silver production between the two of them-and that 92 days represents about 72 percent of the length of the red bar in silver in the above chart… about three quarters of it.”

Interestingly these dramatic changes in both short and long positions did not bring with them any dramatic changes in price. This is clearly something to look out for in the coming weeks. For many analysts, this latest COT report suggest we are l