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Record-High COT Short Position Means Silver Is The Place To Be For Contrarians

Hebba Investments profile picture
Hebba Investments
7.37K Followers

Summary

  • Speculative gold longs cut positions as shorts added to their own positions for the week.
  • Silver speculators increased their own COT net-short position to the highest on record.
  • Trade wars are inflationary and bearish for the US Dollar and thus should help precious metals.
  • Silver should look very appealing for contrarians as it is in record short territory and only needs a little boost to trigger a short squeeze.
  • We are the most bullish on silver that we have been in over a year.

The latest Commitment of Traders (COT) report showed a weekly decline as speculative longs continued to cut positions (3 out of the last 4 weeks), while shorts significantly increased their own positions. At 12.7% short, we are at the highest gold short position since December of 2017. But the real bearish speculative action was in silver as speculators significantly increased their short position to the highest net short on record – which should have the contrarians licking their chops at the opportunity.

We will get more into some of these details but before that let us give investors a quick overview into the COT report for those who are not familiar with it.

About the COT Report

The COT report is issued by the CFTC every Friday, to provide market participants a breakdown of each Tuesday's open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. In plain English, this is a report that shows what positions major traders are taking in a number of financial and commodity markets.

Though there is never one report or tool that can give you certainty about where prices are headed in the future, the COT report does allow the small investors a way to see what larger traders are doing and to possibly position their positions accordingly. For example, if there is a large managed money short interest in gold, that is often an indicator that a rally may be coming because the market is overly pessimistic and saturated with shorts - so you may want to take a long position.

The big disadvantage to the COT report is that it is issued on Friday but only contains Tuesday's data - so there is a three-day lag between the report and the

This article was written by

Hebba Investments profile picture
7.37K Followers
I'm an asset manager at Hebba Alternative Investments with a focus on real assets. In my articles I like to focus on events that affect the macro environment for assets (especially gold and silver), and also introduce readers to different metrics that I believe are under-utilized when assessing investments. On a more personal note, I'm a firm believer that there can be honesty, morality, and integrity in finance (though its rare) and i'd like to believe that I stick to those principles. Thus I never "pump and dump" stocks, I always list the securities we own, and I take it very seriously when I recommend a company - I do not want to see any investors/readers lose money because of my recommendations. I'm not always right with recommendations, but investors and readers can know that I always tell the truth (there is no deception) and I eat my own cooking as recommendations are either always owned OR the reason I dont own them is given (usually related to restrictions on stocks I can buy). Advising people in financial matters is a serious issue and integrity is much more important than money to me, but I do believe both can co-exist. You live with money, but after your death you only have your morality and integrity and thus i've made my choice between the two. A bit philosophical for a bio, but I dont think there's a better way to give investors my background than that. We offer investors a free weekly email list detailing gold, silver, and general economic markets which you can sign up for at: http://www.communitysynergy.com/subscribe/hebbainvestments_subscribe.html

Analyst’s Disclosure: I am/we are long SIVR, SGOL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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