CMKXVictim that was answered in yesterday's blog.

The following data is preliminary and might be adjusted greatly by tomorrow.

http://www.cmegroup.com/daily_bulletin/S...


The open interest (OI) on gold fell by 81,752 contracts. Basically if this data is accurate, then someone got flushed in gold. Most of the front month Feb contracts got sold as OI declined by 36,417. Of course this might be due to delivery next week and people decided to roll forward. However, this does not appear to be the case, because each and every month after Feb also saw a great number of OI reduced by a total of 45,000 contracts. Again, this data may not be accurate. We'll see by tomorrow.

Now let's take a look in silver. The total decline in OI was 5,368 contracts, with most of the decline taking place in the July and Sept contracts, -2,051 and -2,787 respectively. The decline in the front month Mar OI was only 203 from yesterday 70,170 to 70,067. It appears that unlike gold with selling across the board in terms of monthly contracts, silver was resolute in the from month Mar and May with moderate selling in July and Sept.

My interpretation is that people are digging in and will demand physical silver in March and they are willing to sell July and Sept contracts so they can stand for delivery in MARCH. Unlike gold, where you can clearly see that the FEB contracts were the hardest hit and it continued across the calendar. Again, this data is preliminary and the March 1st notice of delivery is still far away unlike gold's FEB contracts which is due next week, but it would appear that people are resolute in the Mar OI and will not sell them in any size despite the selloff.

Combined this with my understanding that the prominent buying by those hedge funds who are planning to stand for delivery has not even taken place yet, I have to wonder what will happen in February when those hedge funds begin to buy in earnest. If the Mar OI aren't being sold right now, what would make them sell as March 1 approaches?

Also I am hearing that some of these hedge funds are selling gold so they can stand for delivery on silver in March. Look at the Comex data today and make your own conclusions.

One more note, look at the volume on the Mar silver contracts and you will see a volume of 1039 in the PNT column. PNT stands for 'Privately Negotiated Transactions' as opposed to the normal open outcry. Notice that this was the only category in the silver with any volume at all. My guess is that for those traders who were inclined to sell their Mar contracts, even they demanded a premium to sell those contracts which is why you saw volume of 1039 and a reduction in OI of only 203.

The data today is extremely bullish in my opinion. It's only a matter of time before silver rockets up. February 8 is the scheduled launch date. Be patient until then and watch it run all the way til March 1st.