qe taper is coming!, page-19

Rare Signal – Producer Merchants Net Long Gold Futures

http://www.gotgoldreport.com/2013/12/rare-signal-producer-merchants-net-long-gold-futures.html

What are we to make of the fact that the largest, best funded and probably the best informed traders of COMEX gold futures on the planet have become net long gold futures, according to data released Monday by the Commodity Futures Trading Commission (CFTC)?

Net long means that these veteran traders, called by the CFTC “Producers, Merchants, Processors and Users,” now have more contracts which benefit from higher gold prices than lower prices. That’s very highly unusual. Indeed this class of traders is dominated by actors who are hedging price risk of their own physical or financial exposure to precious metal, so they are usually more short than long futures. Much more so.

Before we go any further, here’s the graph of the “Producer Merchant’s” net positioning since 2008 as reported by the CFTC. The graph shows just how rare it is to see the Producer Merchants net long. This is the first time in the history of the disaggregated COT reports with data back to 2006.

Take a good long look at that chart covering five years of data. Notice, please, that if we were to assume an average position for the Producer Merchants, it would fall somewhere in the -160,000 contract region, give or take (and that’s without running a scan on it). That means that “normal” for this group of industry gold traders is to have about 160,000 contracts net short, mostly hedging their positions in other markets.

This category of traders includes producers and miners, refiners, large jewelers, large bullion merchants and, perhaps most importantly, it also includes the large bullion banks those gold industry titans end up trading through on the COMEX bourse.