In the futures world there is a short position for each long position. The first horizontal box in the chart above shows the large speculators, the small speculators and the commercials. In the second box, a distinction is made between producers and swap traders (i.e. market makers). We often hear that the commercials are record short or record long. Such comments bridle the horse from behind. The commercials are not a driving force. Speculators are depending on what set of numbers you want to use.Producers mine gold and sell it via futures. The swap traders are the commercial market makers who take the other side of the trade. They do it because that’s what market makers have to do.
Commercials do not cover shorts
Another thing we hear about is the fact that the commercials would cover their shorts or be “smart money”. This is also nonsense. The producers do not buy gold and swap traders are hedged (long gold and short equivalent futures). There is nothing “smart” about being forced to take the other side of the trade.This issue arises constantly. For example, Tom McClellan said, “Gold CoTs data are calling for more declines.” The gold price was $ 1,500 at the time.On March 12, McClellan said gold would move lower despite COVID-19. He said: “The price of gold should start to trend down over the next five years, as the chart shows this week.”