ATLANTA (ResourceInvestor.com) -- For whatever reasons traders classed as “commercial” on the New York Board of Trade (NYBOT) who trade large numbers of U.S. dollar index futures contracts have been vigorously exiting what had been a considerable collective net long dollar position just a few weeks ago.
In the latest Commodity Futures Trading Commission (CFTC) commitments of traders report (COT) issued Friday, covering trades through Tuesday, June 19, those veteran commercial interests reported what has to be viewed as a massive exodus out of long-dollar positions, which means that the commercials are no longer confident of U.S. dollar strength following a move up for the greenback of mediocre proportions (against a basket of other fiat paper currencies).
As regular readers know, the Got Gold Report tracks changes in the positioning of the largest traders for gold on the COMEX and the U.S. dollar index on the NYBOT. The idea is that sometimes we can get a heads up by watching closely what those large, well funded and well informed traders are doing, as they report their trading positions to the CFTC each week.
What makes the NYBOT commercial get-out of USD long positions all the more blatant is that it comes as the USD index actually declined 39 basis points from 82.93 to 82.54 as of COT reporting Tuesday to Tuesday. The move seemed interesting and unusual enough to prompt this GGR supplemental report.
In a one-week period the commercials repositioned OUT of a huge 7,042 USD net long contracts (from 9,853 to 2,811 contracts net long). In other words the commercials were getting out of a bunch of long positions even as the index was headed south! Since the Tuesday COT cutoff the index followed through 20 bps lower, showing a last trade Friday 6/22 of 82.34.
Since May 1, when the NYBOT commercials were then a colossal 23,380 USD contracts net long with USD at 81.63 they have all but gone net neutral as the index itself only managed to test the 83.20s to the upside and only turned in an overall gain of 130 basis points as measured on COT cutoff days (81.63 to 82.93).
Who can say why the commercials saw fit to get the heck out of “USD Longville,” but we can certainly say they have done just that as of Tuesday, which means that the largest traders of U.S. dollar index futures are no longer confident of a higher greenback. If they are right, then the buck should head lower which would in theory be more supportive than not for gold metal.
The next full Got Gold Report is scheduled for next weekend, but for our regular readers below are links to most of the technical charts used regularly in the report with updated technical and market commentary on the charts themselves.
The last Got Gold Report one week ago noted a big reduction of net short gold positions by commercial traders on the COMEX which is also fairly supportive of firming gold prices. That report also noted the hot pace of commercial’s reducing dollar index long positions then.
The indicators this report follows closely continue to improve modestly which supports firmer gold prices more than not, but the usual summertime light liquidity trading caveats apply. When liquidity is light and trading thin markets can move and be moved farther and faster than average. However, that just presents traders on both sides of the gold and silver market battlefield with opportunity when it occurs, doesn’t it?
Until next time, as always, MIND YOUR STOPS.
Got Gold Report Charts:
Silver 1-year daily
Gold 9-month daily
Gold 2-year weekly
HUI 9-month daily
HUI 3-year weekly
HUI:Gold Ratio 1-year weekly
HUI:Gold Ratio 2-year weekly
U.S. dollar 1-year daily
U.S. dollar 2-year daily
The above contains opinion and commentary of the author. Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure: The author currently holds a long position in streetTRACKS Gold Shares, iShares Silver Trust and holds various long positions in mining and exploration companies.
