This week’s CFTC report indicates that commercial shorts on the CFTC, both gross and net (excluding commercial longs) have hit another fresh all time record, at -482k and -290k. Should the ongoing asset liquidation squeeze forcing gold prices to decline, fizzle out, and should gold prices resume their trajectory higher, the only question will be at what point will this barrage of paper shorts get the marching (and margin) orders to cover.
And in related liquidation news, the CFTC COT indicated that the short covering rampage in the EUR seen three weeks ago has not returned. Net shorts once again increased in the week ended June 29 by 2696 to -73,670. This was to be expected after the biggest short covering episode in the history of the the EUR shook out all weak hands. Yet the real action in the last week started on June 30, which data was not captured in today’s release. Assuming there was a fund liquidation as we suspect (and which is also impairing the price of gold and other commodities), we expect the net short number out of next week’s CFTC to once contract.