Sunday, May 1, 2011

COT report on Silver (Updated)

Some interesting developments in this week's Commitment of Traders (COT) report for Silver.

For those who aren't aware, the COT report is issued by the COMEX and provides information about whether speculators are long or short on paper silver contracts.

At the close of business each Tuesday (although the report itself is released on Friday), the COT report records the long and short positions of three categories of market-user: commercials, non-commercials and non-reportables.

When you look at these reports you will see that 8 or less large traders hold a net short position equal to 227.9 million troy ounces of silver.  The report also breaks down the totals for 4 or less large traders and the '4 or less' traders is now 212.7 million ounces.

As we have detailed before, the '4 or less' category is completely dominated by JP Morgan.

The big news is this weeks report is that when you compare this report to last weeks report, the '4-or-less' category is down 50.8 million ounces.

Yes... you read that correctly. The Commercial net short position in this report shrank by a whopping 10,158 contracts which represents 50.8 million ounces. This is possibly the biggest one-week decline in open interest in silver, ever !!

This is huge news.

If you extrapolate the 10,000 or so contract decline in silver's open interest that's been reported in the daily reports for Wednesday and Thursday (after the period covered by this latest report)... it's obvious that JPMorgan et al are running for the hills with their short position on Silver.

And when you consider that the price of Silver is almost at it's highest levels in history, this will be costing JP Morgan a fortune.

Which raises an interesting question which you may wish to ponder if you are having doubts about where the price of Silver is going.

If Silver has 'topped' and can only fall in value from this point, why would JP Morgan scramble madly to cover a record breaking number of shorts when Silver is near it's highest price in almost 5,000 years?

(The same thing occurred in Gold this week)

If you are JP Morgan and you know the price of Silver and Gold is going to be going down, why cover record numbers of contracts at these high prices?

It doesn't take a Ph.D to analyse this. It only make sense to cover massive amounts of short contracts (... and let's emphasize that we just had the biggest one week decline in open interest EVER!) if you are worried the price of Silver and Gold is about to shoot much, much higher.

May is going to be an interesting month.


If you haven't noticed, Silver (and Gold) have opened on the GLOBEX with dramatic drops.

Have the fundamentals changed?  Has Soverign Debt been resolved?  Or are desperate bankers taking desperate measures to crush the paper price of Silver? 

Let's see if Silver is on sale in North America by morning.

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  1. Buy the dip! Sale your car! Your house, anything of value, exchange it for silver. The fight is on!

  2. The dip is already ending...

  3. Mannnnn.... the morning cant come fast enough... Damnit damit DAMNIT!!! ...V

  4. I believe it is more likely than not that hard assets (gold, silver, oil, uranium, et cetera) will turn out to be good investments because of the actions of governments and central banks around the world, and that real estate in Canada is due for a major downturn when interest rates inevitably rise.

    Somewhat ironically, the main reason I am not completely convinced of this is because of the gold bug crowd. I find that people like Bill Fleckenstein, Jim Rickards, Max Keiser and Marc Faber are the only ones that seem to make any sense these days, but then I notice that many of the people who also gravitate to this worldview tend to be far-right libertarian/wingnut types.

  5. Do the trivia buffs out there realize that the "Wizard of Oz" was written in 1900 and is a story of the bankers suppression of silver as currency. In the book the wicked witch of the east, who was crushed by Dorothy's house, was wearing silver slippers not the ruby slippers shown in the film. The silver slippers allowed Dorothy (the common people)to walk the yellow brick road. The wicked witch of the east represented the eastern bankers of London and New York. The story is filled with financial metaphors, naturally Oz stands for ounce.

  6. Want to send the bankers a message and serve up the biggest nightmare possible to bankers? Use the massive dip that they thought would scare all silver holders out of their position as an opportunity to finally extract yourself from the awful possibility that silver and gold paper derivatives such as the SLV, GLD, and gold and silver futures contracts may crash in value in the future, even as the price of physical gold and physical silver rises, as more and more paper gold and paper silver owners convert their paper into physical.