A Silver Takedown's Currently in Progress

• Commercial Short positions at highest long to short ratio since July 2008

• Commercial Short positions up 16,000 contracts in last three weeks

• Contracted Silver Volume is now 619 Million ounces.

• Excessive leverage :Comex has only 60 Million ounces registered for delivery. (more than 10-1)

The COT report for September 15th (released on Friday, why it takes three days to compile these numbers is only for the government to know) is showing a concerted effort by funds to buy into the silver market and a corresponding effort by the Commercial Traders to short cover. The last three weeks have been shocking on the order of magnitude of what is happening in the stock market with HFT.

Commercial Traders increased their short position by 15,811 contracts or 79 million ounces in just the last three weeks while dropping their long positions by 3,400 contracts. That puts the Short vs Long ratio at 3.48, the highest since July 11, 2008 when silver was 18.38 per ounce.

Large Speculators have bought heavily into the market, to the tune of 19,300 contracts or 96 Million ounces, however they have also increased their short positions by 1,900 contracts

Small Speculators are beginning to trend towards caution, both long and short contract positions increased by 1800 contracts.

It's clear that the Large Speculators and Commercial Traders are locked in a battle with dramatic withdrawls in Money Market funds (as reported with federal guarantees expiring) apparently looking for a home.

While not a surprise, the willingness of the Commercial Traders to short so many contracts in the face of rising prices to offset the sudden demand is curious in the least. This is especially true since the COMEX does not have the silver on hand to back up even 10% of the contracts that have been written.

This massive surge is the largest since last July when the Commercial Short position increased over a three week period by not quite 12,000 contracts. But at that time, the long position only dropped by 500 over the three weeks.

My advice is if you are in it for a long term and are comfortable with where you purchased it at, hang on. If you need a short term gain, now could be a good time to lock in the profits. This is like watching a couple of dinosaurs going at it with blood in the air. As a tiny mammal, there are safer places to be than underfoot. After being unchanged and even up last week, the indicators are pointing to a correction. I'm in it long, so I'm the first to admit that I'm underfoot on this one.

Disclosures: Long SLV, GLD, physical metals, retirement accounts

Comments

[bkdc:]

Now if only 10% of the long contracts demanded PHYSICAL DELIVERY to keep the system honest.

Sep 20 04:53 PM

[SloBurn:]

Yea, but then your last name would be Hunt, and the world would fall on top of your head.

Sep 20 05:32 PM

[Barryyes:]

Good explanation of the long and short volumes, but I still can't see why the big short position has to drag the spot price down. Why not ignore the shorts? Won't their positions expire worthless like all my calls have when they savage the price during expire week?

And maybe someone can tell me again how all this manipulation of the silver market is legal...

Sep 20 11:38 PM

[Plebian:]

Most people say silver seems to always follow gold in price movement, but it's been pointed out that silver is a much smaller market as compared to gold, and thus much easier to 'manage'. Would it not make sense that pushing down silver prices is the means to control the precious metals' prices in general, even that of gold? Notice that silver was demonetized before gold was, so in a way is was used as a means to demonetize the precious metals in general. It follows that the key to breaking the fiat money 'system' is found in silver.

The IMF announced sales of $13B of hard asset gold in exchange for paper money (bad money drives out good money). Everyone knows the world has the capacity to 'print' paper money without limit, so it is laughable that they want to exchange gold for $ supposedly to help 'finance' poor nations' money needs. Why not just print another $13B while the US is printing their Trillions of $ to bail out a hopeless system! Surely that would cost a lot less than 13,000,000 ounces of physical gold sales. Or could it be that they're actually selling paper gold?

Better yet, if they are so keen at giving away physical gold, why not give this gold directly to these so-called poor nations, so that they can use it to shore up their finances?! Then maybe in 3 to 5 years, if they have been smart enough to hang on to their gold, it will be worth multiples of the $ that they would have gotten to begin with. Another benefit of having assets in gold is that these poor countries' currencies would suddenly be stronger, giving them the financial and economic edge that they so much need. Everyone would suddenly be more interested in investing in these poorer countries, because now they would have real hard assets to back up their financial system.

So, why is the IMF really selling 403 tonnes of 'gold' for?...

Sep 21 12:08 AM

[User 488906:]

The IMF gold sale is just a small concession (by the U.S. to the holders of U.S. debt).
The U.S. could have stopped the sale but they did not.
Why?
These debt-holding countries, by the way will purchase the gold.
This is a blatent move to prevent the dollar from tanking even faster than it already is.

Sep 21 03:09 AM

[2Labradors:]

gold and silver at this level are becoming like stocks in this sense... everyone (long or short) WANTS and is EXPECTING a pullback. Therefore I doubt we'll get one....

Sep 21 11:59 PM

[dipps:]

I agree - don't stand in front of a locomotive === zz$RR ===
Silver has industrial value as well as being precious.
Buy on dipps

Sep 22 04:08 AM