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A CoT and a Grain of Salt

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Once per week, the U.S. Commodity Futures Trading Commission (CFTC) requires that market participants submit data on their proprietary and customer positions. These surveys are then cobbled together as Commitment of Traders reports, and they are typically issued after the market close each Friday.

These reports are surveyed every Tuesday but are not always issued on Fridays. If a U.S. government holiday intervenes midweek, the reports will be delayed until Monday. So, at best, the data is already 74 hours stale when issued. At worst, it's 98 hours stale. As such, the degree to which the reports are helpful is already limited.

But they're all we have. Could the CFTC demand a survey every day and then crank out the data the next morning? In a perfect world, yes. But anything that has to do with a U.S. government agency does not fall within a "perfect world" category. Instead, we just take what we can get.

In the end, the Commitment of Traders report is only helpful if you know the history of the reports. If, in the past, certain levels of positioning have led to rallies or selloffs, the reports can sometimes give you a heads up and early warning of what might be coming. For example, here's a post we wrote in early March, just as COMEX gold was about to surge to new all-time highs:

Or here's one from 2022, which was written shortly after a recent report revealed that the "Swap-Dealing" Banks were actually net long COMEX silver while the Hedge Funds were suddenly net short:

Again, though, the Commitment of Traders report is not a trading tool, as the delay in relaying the weekly surveys limits their helpfulness.

But here's the other problem. The numbers might not even be accurate. Who's to say that a Swap-Dealing Bank is honestly reporting its positions? As far as I know, the CFTC isn't demanding honesty each week. Instead, they just take it on faith that the market participants are being truthful.

That's all well and good, I suppose, if there's a history of 100% honesty in the reporting. But there isn't! Did you know that J.P. Morgan was once fined $650,000 for deliberately submitting inaccurate and misleading information? Here's a link to a summary of the case:

CTFC

That begs the question: Is a $650,000 fine sufficient incentive to change your practices, hire a new "third-party vendor", and come clean? Or, perhaps, is the fine enough incentive for you and the other bullion bank trading desks to work more efficiently at covering your tracks?

This became a current topic again because the last two Commitment of Traders reports have been very confusing by any historical measure. What do I mean? Almost always in price corrections, the "Large Speculator" hedge and trading funds will be found to have been dumping long positions and perhaps even adding a few new shorts. Almost always, but not currently.

Instead, over the past two reporting weeks as the COMEX gold price has fallen a total of $105, the "Large Speculators" in COMEX gold have liquidated a NET grand total of just 73 contracts. Seventy-three. This while covering 2,214 NET shorts. That's NET Large Speculator buying pressure of 2,141 contracts and yet price fell by over 4%. As a sub-category, the "Hedge Funds" have added 1,943 new longs and 1,652 new shorts for a NET gain of about 300 long. Again, that's buying pressure.

So who was supposedly doing all the selling? Who knows? You can't find sufficient position changes in the "Commercial" category either. If you dig really deep into the weeds, the only significant selling pressure seems to appear in the "other reportable" category, but what's that? Even the CFTC admits they have no idea.

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So what's the point of all this? I don't know. I guess it's just to serve as a reminder that you should trust no one within this current pricing scheme. Don't trust The Bankers and certainly don't trust the regulators. Who/what can you trust? The metal in your own two hands. Period. End of story.

Only physical precious metal comes with no counterparty risk and protection against the frauds and scams of the digital derivative and fractional reserve pricing scheme. Global central banks continue to actively diversify away from fiat currency and into physical precious metal. You should consider taking their lead and doing the same.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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