Wednesday, September 14, 2011

Silver Commitments of Traders Update

Courtesy Excerpt of the Private Got Gold Report

HOUSTON – Just below is a courtesy excerpt of the full Got Gold Report which was delivered to Vultures (Got Gold Report subscribers) Sunday, September 11, and posted to the password-protected GGR subscriber pages then.

This particular excerpt is of the legacy commitments of traders report (COT) for silver and our commentary to subscribers.  This commentary is for the Commodity Futures Trading Commission (CFTC) report released Friday, September 9, for commercial positions as of Tuesday, September 6 (about one week ago).  It is just one small portion of the full update available to Vultures on the subscriber pages. 

Bottom Line: Past 10 weeks silver up 23.8% - Large commercial net short positioning (LCNS) up by 62%.    

Continued… ***

Silver COT  
Silver jumped up to the $43s on Friday, Sep 2, answering gold’s short-covering surge but then ran into determined opposition there on Monday, Sep 5 in the $43s.  Another attempt to rally on COT reporting Tuesday ended at $43.22 and then the sellers got the upper hand, knocking a buck off the price to close COT reporting Tuesday at $41.99.  The COT figures below reflect silver which had just failed to break north of $43.50 resistance then and was selling off.  

So, as silver actually gained a net 71-cents or 1.7% COT reporting Tues/Tues, from $41.28 to $41.99, the combined COMEX large commercial traders increased their collective net short positioning by 2,158 contracts or 4.8% to 47,306 contracts net short. 

The open interest for silver only increased by 1,074 contracts to 113,449 lots open.  That is still not at all a high open interest figure, by the way, and it was little changed by Thursday of this week.  We cannot expect the open interest to be as high as it was a year ago because initial bond and margin maintenance rates have doubled since then.  Having said that, there is still ample leverage available to silver spec traders in COMEX futures. 

Just below is the nominal LCNS graph for silver futures. 

20110914LCNS

 Source CFTC for COT data, Cash Market for silver.

In contrast with gold futures, there has been increasing commercial short ‘opposition’ to the rise in silver prices over the past ten weeks or so, as the graph above clearly shows.  Since the COT turning low price set on June 28 at $33.91 the ounce, Cash Market silver has advanced a net $8.08 or 23.8%.  Over the same 10-week period the large commercial traders have added 18,140 contracts (90.7 million ounces equivalent or 62%) to their net short positioning. Past 10 weeks silver up 23.8% - LCNS up by 62%.     

Of course we cannot know in advance if this higher short positioning will be resolved the same way it was last year and earlier this year through higher and rapidly rising silver prices and commercial short covering (as we see now with gold), or if this time the Big Sellers will get an opportunity to cover at lower silver prices, but we do wish to point out that the chart reflects much less confidence on the part of the commercials for lower silver prices than last year when their net short positioning was much higher and silver prices were much lower.   

As we do with gold, we compare the nominal silver LCNS to the total open interest.  We think that gives us a better idea of the relative positioning of the largest hedgers and short sellers – the Producer/Merchants and the Swap Dealers combined into a single category – compared to all the other traders on the COMEX. 

When compared to all contracts open, the relative commercial net short positioning (LCNS:TO) for silver edged higher this week from 40.2% to 41.7% of all COMEX contracts open, which, we have to note, is the highest LCNS:TO of the year.  We can say that the Big Sellers of silver futures are taking a kind of opposition stand with silver trading in the $43s. We cannot say whether that “stand” will prove to be “right” or instead will prove to be more jet fuel for the next leg higher for silver – yet.   

The silver LCNS:TO graph is just below.  

20110914LCNSTO

Source CFTC for COT data, Cash Market for silver.

While not a prediction, note the result of the last time the commercials showed an LCNS:TO in the 41% range on the chart above (March of 2011, silver $34.21 on its way up to $49.75, with the commercials then in retreat).

(End of excerpt.)   


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The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

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