HOUSTON – 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.
Source: CFTC for COT, Cash Market for gold, GGR. To quantify the chart, as of November 26 the Producer Merchants reported 5,910 contracts net long with gold then $1242.