This was sent to me in an email. I don't know why the graphs won't show.

Greetings all,

This is just a quick note to let everyone know that there will not be a formal update to the Got Gold Report this weekend, but all the charts will be updatedby Sunday evening.

Just click on the links in the most recent report and they should take you to the most current version of the charts.

For those who are keenly interested in the Commitment of Traders(COT) reports, the COT report was released at 3:30 today and, as expected, the COMEX commercial traders very strongly increased their collective net short positioning in gold and silver.

This will be remembered as the week that the market learned for sure of the “Barrick Put” on gold.(Barrick’s announcement that they would sell 90+ million shares to finance closing their fixed hedge book of 9.5 million ounces (295 tonnes).The market only learned of that after the COT cutoff, however.

In gold, as the metal increased $39.50 to $995.40, COT reporting Tuesday to Tuesday, all traders classed by the CFTC as commercial added a staggering 54,089 contracts to their net short positioning (LCNS), an increase in the LCNS of 25% in one reporting week.Of course that suggests that the commercial traders were very strongly motivated to hedge and sell short over the past week as gold challenged the $1,000 mark.

Indeed, they were so motivated to take the short side and so convinced that gold would decline now or soon, that they now hold an all time record commercial net short position nominally of 270,797 contracts net short.That easily eclipses the previous record of 252,740 set in February of 2008.(Take note of the date and what happened to gold shortly thereafter).

Below is the graph of the nominal commercial net short position for gold:

As a percentage of all contracts open, the record-high LCNS translates into a record high LCNS:TO as well.(The ratio of the LCNS to all contracts open on the COMEX, division of NYMEX.) The LCNS:TO comes in at a very dangerous (for both bulls and bears) 59.95%Call it 60%, shown in the graph just below.

A very high LCNS:TO, in this case a record high LCNS:TO, means at least two things. 1. There is tremendous opposition to further advances for gold futures. 2. If bulls are able to overrun that opposition, it will be like throwing 100-octane gasoline (and lots of it) onto the gold rally fire.

For the bears, it is all about not letting that happen. For the bulls, it is all about pushing gold upward through the bear's defenses. Because that turns bears into buyers in size.

It is interesting as all get out right now, but dangerous for short-term traders. Very high volatility is almost a certainty.

Silver

In silver, the COMEX commercials added a whopping 8,345 new net short contracts (17.4%) to show 56,401 contracts net short as the open interest increased by 9,750 to 116,421 open.That’s the highest commercial net short position of 2009 so far, but well under the record set in December 2005 of 87,195 contracts net short.

Notice that for both gold and silver the commercial net short position increased less than the amount of increase in the total open interest.

The nominal commercial net short positioning is shown in the graph just below:

As compared to the total open interest, the silver LCNS jumps up from 45.1% to 48.5%, but remains nowhere near a record.

If gold is to power on higher through the Great Wall of Gold (it is challenging it now), then it must advance far enough into it, fast enough, to cause buying from both the long side and the short side.

I suspect that if gold can advance above $1,030 and remain there any length of time at all, a fierce amount of buy stops and short trailing stops will kick in.On the other hand, should gold fail to hold $990, an exasperation sell-down is likely, taking silver down with it.Much depends on the direction of the dollar probably. The buck plumbed new 2009 lows this week, but the ICE commercials added a large number of net long contracts as of Tuesday (looks like about 9,000 contracts net long at first glance).

Out of an abundance of caution I personally raised my stops for gold and silver ETFs and futures up to the tightest of settings Friday morning.As of this minute they were not even close to being challenged, however, to my pleasant surprise.

Apparently the largest of the largest traders in gold and silver futures were willing to bet heavily that the precious metals had advanced too far.Are they right, or is this a repeat of the 2005 breakout of gold from the $450 level?

We’ll probably know by the end of next week which.Meanwhile, MIND YOUR STOPS.

Oh, and try not to offend the Trading Gods by giving back all the fruits they have given in gold, silver and don't forget the natural gas royalty trusts which have been "en Fuego!"

I'm resisting the urge to yell "yahoo!"

Did I mention MIND YOUR STOPS?

Have a good one,

Gene Arensberg

Got Gold Report

In association with Brien’ Lundin’s highly acclaimed Gold Newletter