An excellent post from the Acting Man on October 6 explaining...

An excellent post from the Acting Man on October 6 explaining why bank futures positions (net short) wont kill them:

"As many of our readers probably know, the recent developments in the commitments of traders report on COMEX gold futures have been quite positive, in that a large percentage of the speculative net long position was liquidated. This has to happen from time to time in order for the market to consolidate and fresh firepower to accumulate on the sidelines.

Before looking at the details, we want to point out that the widely held opinion that the commercial hedgers represent the 'smart money' in gold futures is wrong. The hedgers have been net short gold since it first crossed above the $270 level back in 2000. Pray tell, how 'smart' is that?

In reality, most of the hedger positions are in fact just that: hedges. There are offsetting position somewhere else on their books, either in the form of bullion, delivery commitments by miners that have sold forward, or other otc derivatives contracts. If that were not the case, all the bullion banks would have been bankrupted by the bull market by now. Alas, that has not happened and none of them have ever reported any large losses in connection with their gold trading."

There's a lot more - I highly recommend it.

http://www.acting-man.com/?p=10750