Enigma,
Commercials{producers} are 80-90%{volume and OI} of the market at any given time and are short roughly 80% of the time. Who might you ask are the commercials selling to? Hedge funds, floor traders-brokers etc... These figures are applicable to all commodity markets. Since they, as you guessed, rarely go long, it is not difficult to tell when they are covering their shorts, as is the case over the past week, as the open interest on the futures falls.
If the physical market begins to get really tight, open interest should drop off the map until the price begins to rise and at the same time attracts specs. Once this begins, reading the OI becomes progressively more difficult. Now, as there is not a great deal of spec interest, the OI is quite easy to read. The drop in gold future OI is bullish. My personal feeling is that the public specs are so out of this market a final washout will not occur, just quiet bottoms until the specs of all sorts get more involved. A washout from higher levels is, however, not out of the question once the specs get more active.
hope this helps,
paul |
