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August 4, 2020 | Gold Soars to New High Above $2000 While Managed Money Sat it Out

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.


Many hedge funds are stuck in a box hoping for a pullback to buy gold. Some have even bet against the rally.
Understanding FuturesIn the futures world there is a short for every long.

The first horizontal box has Large Specs, Small Specs, and Commercials. This is It’s Old COT reporting.

The second box distinguishes producers from the swap dealers (i.e. market makers). This is New COT reporting.

Those are the actual data links for the above chart.

Large Specs, Small Specs, Unreportable Positions

Large specs are generally hedge funds that trade futures in size. Small Specs are typically individual traders.

Sometimes small specs are called unreportable positions. If you are big enough you have to tell the CTFC what your position is.


The producers mine gold and sell it via futures. They are always short.

Swap Dealers

The Swap Dealers are commercial market makers who take the other side of the trade. They do so because as Market Makers they have to. It’s their business to make a trade.

The swap dealers are hedged. They do not much care if prices rise of fall. If that was not the case, they would be blown out of the water on big, sustained rallies. That does not imply honesty as the dealers have been caught manipulating. Rather, they manipulate if their hedges get out of balance or they see a chance to profit. The latter could be in either direction, up or down in the price of gold.


The commercials are the Swap Dealers + the Producers + the Manufacturers or Jewelry maker who buy gold to use it. It is a confusing mix which is what brought about the disaggregated reports (the New Cot reporting).

We frequently hear things like “commercials covered” their shorts or the commercials are the “smart money”.

That is nonsense. The producers don’t buy gold and the swap dealers are hedged (long gold and short equivalent futures). There is nothing “smart” about being forced to take the other side of a trade.

This subject comes up all the time.

For example, on December 27, Tom McClellan said “Gold COT Data Call for More of a Drop”

Gold was at the $1500 level.

On March 12, McClellan said Gold Moving Lower Despite Covid-19.

McClellan said “Gold prices should start trending down now, and for the next 5 years, according to this week’s chart.

Managed Money

Managed money is a way of disaggregating the Big Specs from the Commercials. Some people consider the big specs to be the “smart money” and the small specs to be the “dumb money”.

Reporting Frequency

Cot reports come out on Friday for the previous Tuesday.

Every week, we do not know what happened between Tuesday and Friday.

Huge 8-Week Run

Gold Rose for 8 Straight Weeks

I asked “What’s Next?”

COT Report Still Bullish

Gold generally advances in periods of long accumulation and generally sells off during periods of long liquidation.

Long accumulation and liquidation refer to periods when the speculators and managed money are adding to or selling their position.

Disaggregated COT Position July 28

  • Managed Money was 211,455 contrats long and 36,945 short. Managed Money decreased long position by 11,885 contracts and decreased the short position by 2,268 contracts. The net of Managed Money is +174,510 contracts.
  • Other Reportables were 140,526  contracts long and 37,434  contracts short. Other reportable shorts increased by 10,029 contracts. The net of Other Reportables is +103,092 contracts.
  • Nonreportables were 73,497 contracts long and 30,646 contracts short. The net of Nonreportables is +42,851 contracts.
  • The net non-commercial position is 320,453.

Aggregated COT Position July 28

  • The Commercials were long 331,272 contracts and short 651,724 contracts.
  • The net commercial position was -320,452 which ties to the net non-commercial position in the disaggregated report.

Those numbers are delta-adjusted options and futures combined.

The Futures Only commercial COT position is 139,803 long and 418,180 short for a net of -278,377 which matches the above chart.

Despite the long liquidation since March, gold has advance by about $400 to new record highs.

What About Short Squeezes?

Ignore the talk of commercials having to cover shorts. That is not what drives the process.

The producers don’t buy gold and the swap dealers are hedged (long gold and short equivalent futures).

Short squeezes do impact the hedge funds, managed money, and small specs.

Managed money has 36,945 short contracts,  other reportables are short 37,434 contracts, and nonreportables are short 30,646 contracts. The total is 105,025 short contracts.

Those are short positions, not net positions, and that is what drives short squeezes, not commercial shorts as widely believed.


There is ample room for Fear of Missing Out (FOMO) to kick in as the managed money and big spec hedge funds sat out much of the recent rally.

And with 105,025 short contracts there is plenty of fuel for a short squeeze too.


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August 4th, 2020

Posted In: Mish Talk

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