FEB 20, 2017
This Silver rally is beginning to look serious with all the global financial mess stories going around with Europe falling apart, China's debt explosion and Japan's never ending debt cycle, never mind the biggest bubble in U.S. Debt that no one wants to face.
Silver in it's self is having it's own issues with supplies dwindling through mining, investors and an ever increasing industrial usage, It just might be time to make sure your positioned before the physical supply become's very scarce or unattainable.
According to the last COT report, commercial traders are holding one of the highest net short positions in silver futures.
What is strange, looking at the current stage of the rally, this position should be much lower.
JPMorgan and the Shanghai Futures Exchange continue their dramatic hoarding of silver.
Now their silver holdings are the highest in history.
In my opinion, we may be at the start of a historic rally in silver prices.
In my previous articles on gold and silver markets, I discussed the differences between these two markets. In this article, I would like to show that this difference is even more striking now.
The Commitments of Traders Report
Firstly, let me show the current positions in gold and silver futures, held by the so - called Commercials.
Note: According to the US Commodity Futures Trading Commission: A trading entity generally gets classified as a "commercial" trader by filing a statement with the Commission, on CFTC Form 40: Statement of Reporting Trader, that it is commercially "... engaged in business activities hedged by the use of the futures or option markets."
Due to the fact that Commercials have enormous financial strength, I call them the market makers. What is more, very often the current position held by these players is a good medium-term indicator of the current state of the market. The chart below shows the net positions held by Commercials in gold and silver futures:
(Source: Simple Digressions and COT data)
Note: Contrary to other analysts, I measure the size of a position held by a group of players in gold and silver futures against the total open interest. For example, on February 14, 2017, Commercials were holding a long position in gold futures amounting to 105.7 thousand contracts. At the same time, these players were holding a short position in gold futures amounting to 233.5 thousand contracts, so a net position was SHORT and its size was 127.8 thousand contracts (233.5 thousand less 105.7 thousand). On that day, the total open interest in gold futures was 415.1 thousand contracts. As a result, commercial traders were holding a net long position amounting to 30.8% (127.8 thousand divided by 415.1 thousand).