Gold & Silver Open Interest - Problems brewing?

Discussion in 'Commodity Futures' started by Colonel_Blood, Sep 11, 2003.

  1. Anyone watching the Dec Gold & Dec Silver open interest because it's really building to I think historic or near historic levels.

    Dec Gold 204,059 contracts + 4,000 from yesterday

    Dec Silver 98,034

    To put this in perspective at 100oz a gold contract that's 20.4 million ounces or $7.75 billion

    Silver is 490 million ounces or $2.6 billion

    There are rumours starting to float that some big investors and/or funds couldn't see a way to buy a crap load in the cash market so entered the futures wanting to accept delivery.

    We must obviously assume that the OI will come down a lot going in the deliver process (Dec 1 - Dec 29) but even so you can't just click your fingers and deliver very large amounts of gold/silver that easily.

    I think right now there's a better than even chance that there's going to be problems and/or sparks. As we get nearer the date we'll know more.

    Anyone following it?
  2. Sending this back to the top in the hope someone can tell me what the above could mean for the potential price.

    I am heavily invested in silver.

  3. Taking delivery is what causes a commodity to rise!

    It is funny that Gold and Silver keep on making new highs while the big commercials short the hell out of gold futures. Look at CDE and some of these gold stocks that are ripping!!! Short squeezes have already occured in some of these smaller metals stocks.

    The gold situation is tricky. We have to be in some sort of "B" wave or "X" wave from an elliott perspective because nothing makes sense in this market.

    Ask an old time about what he thinks about the stock market and the gold/silver situation, and he will probably that he has no 'feel' for this market.

    I think that both gold and stocks will crap themselves. It just a matter of time.
  4. Lord

    Open interest is the amount of contracts that are open in the market, both long and short.

    So right now there are over 200,000 long and short positions in gold that are held by a combination of speculators and trade. 99% of speculators don't want or have gold to deliver, they are just trading the price. But some people do or are in a position to either deliver or accept delivery, normally the trade, miners, cash gold dealers etc.

    If you are long 1 contract of gold you have only two options, either to sell it on the futures market (to take your profit/loss) or take delivery of cash gold when the contract expires.

    If you are short 1 gold contract then you again have two options, either buy it back in the futures market or deliver cash gold on the expiry.

    So if the gold/silver open interest is high going into delivery it can either mean that the longs want to accept delivery, or the shorts want to deliver, making both sides content.

    My point is that the current position in actual gold/silver is very very large and while one can easily take deliver (just have enough $) it is not easy to deliver that kind of quantity.

    It may all be a bluff with say the longs trying to scare the shorts into paying higher anf higher prices to buy back their positions. It may not, but whatever the case sparks could fly if the open interest is not reduced significantly say before the start of Nov.

    Hope this helps
  5. T-REX


    - Or -

    Maybe its the fact that many people are going back to using gold as a hedge against inflation and falling stock prices that are bound to come in the near future?

    We are not too far away from a terribly overbougt scenerio being played out in the stock market. We are now trading below the 10-day MA support on the ESZ3 contract!!!!! Thats extremely bearish and paints a picture of distribution rather than accumulation taking place?

    Just a thought.
  6. m22au


    Although the open interest for both is rising gradually, it's not a big enough change in itself to cause a short squeeze. That's coming from someone who is well invested in silver. And like Colonel Blood said, it all depends on what the December open interest is closer to the delivery date.

    What is interesting ... is that the open interest in silver is roughly
    equal to the total above-ground supply in silver, and nearly 5 times the total silver inventories held at the Comex.

  7. Babak


    This is a top (intermediate term) IMHO: