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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (16656)	7/18/2004 8:39:38 AM
From: jimsioi	of 110194

mishedlo, but there is a limit to the number of contracts. You write: "I suspect things would be different if there was a limit on the number of contracts that could be in existence" There are at least two limitations that come into play on the number of contracts that can be in existence, as open interest expands and speculative long and commercial short positions increase. First, there is the questions of capital and risk....the Commercials have more capital and can tolerate more risk than the Specs. Therefore when the market has risien on Spec buying it becomes vulnerable. The commercials have never been run out of the metal markets; the Specs always have been sooner or later... Secondly, there are position limits that are more strenuous on speculators than on Commercials. The Commercials (hedgers) can short to any limit, speculative buyers are limited the the number of long position they can have by entity. Certainly the number of entities could expand, each holding the maximum position size but as of now there seems to be limits on the amount of participation. With one thing I am in total agreement: "If everyone would take physical delivery of gold and silver we would be in one hell of an uptrend." Really you can replace "everyone" with about "anyone". Inventory stocks have not shown the type of reduction that would suggest in gold and silver that speculators are taking delivery off the Comex in amounts to pressure the shorts. (This may have changed a little with the July Silver delivery, accounting for the improvement in price.) The move toward taking delivery has to change for the two metals (Silver and Gold) to go significantly higher, in my opinion. Until that happens its as much a paper game on the long side as the short, and the speculators are sooner exhausted.

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