A Few Silver Related Graphs

Any serious silver investor knows that there was an attempt to break silver down through its implied support on Friday, Sep 19.  In short term tick charts the sell raid took on a look something like this. 

Take a look at the COMEX open interest graph for silver futures below.  The Key point here is that there is an extremely high open interest at the same time that silver is probing its implied lows.  In essence there is an unusual amount of “paper metal” in the system. 

By the way,  a COMEX open interest of 171,260 contracts is equivalent to 856,300,000 ounces of metal.  (That's about $15.4 billion worth sold into the COMEX, mainly by traders and speculators who neither have the metal nor intend to have it in the future.) 

One more interesting graph before we get back on the road...  Just since July 15, as silver declined $1.97 or 9.5% (from $20.67 to $18.70 measured on Tuesdays) Managed Money traders have, by doing their usual trend-following, gone from hugely net long (by 45,943 contracts) to report an unusual net short position of 1,703 contracts.  

Over that same period Managed Money has ramped up its collective silver short bets in a big way again.  To the tune of a near record 42,249 shorts, which is equivalent to 211 million ounces.    (That alone is an enormous amount of potential short-covering "horsepower," folks, and, once the MM traders become convinced the sell down is over, I believe they form part of the basis - the fuel of the next rally-reversal.  Here's the MM Shorts garph for reference.

Meanwhile, behold an industry that sees little downside at current levels, reporting only 19,354 contracts net short.  Really?  For an entire industry?  That's not very much hedging... The only time in our records that the Producer/Merchants held fewer hedges on silver futures was June 22, 2006, when they held 17,872 contracts net short with silver then $10.26.  See for yourself in the graph: 

(In this particular graph as the blue line rises it means a smaller net short position.)

Apparently the silver trade is not motivated to put on significant hedges with silver anywhere near the current range.   

 

"Ya think silver volatility is about to spike much?"