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Silver Weekly: Where Is The Fear?

Orchid Research profile picture
Orchid Research


  • Silver comes under renewed downward pressure so far in February due to fading market fears.
  • Spec positioning suggests that there is plenty of dry powder of the speculative community to extend their net long positions in Comex silver.
  • ETF investors resume their buying, in line with my expectations.
  • Expect some buy on the dips in silver sooner rather than later.

FEAR, Mike Twichell (Saatchi Art)


In this brief report, I wish to discuss my views about the silver market through the Aberdeen Standard Physical Silver Shares ETF (NYSEARCA:SIVR). SIVR is directly impacted by the vagaries of silver spot prices because the fund physically holds silver in London.

To do so, I start by analysing the changes in speculative positions in Comex silver futures contracts (based on the CFTC statistics) and ETF holdings (based on FastMarkets' estimates) in order to draw some interpretations about investor and speculator behavior. Then, I will discuss my global macro view and the implication for monetary demand for spot silver prices and SLV. I will conclude the report by sharing my trading positioning.

Speculative positions on the Comex

The CFTC statistics are public and free. The CFTC publishes its Commitment of Traders report (OTC:COTR) every Friday, which covers data from the week ending the previous Tuesday. In this COTR, I analyze the speculative positioning, that is, the positions held by the speculative community, called "non-commercials" in the legacy COTR (which tracks data since 1986).

It is important to note that speculative activity rarely involves physical flows. In fact, it is very uncommon for speculators who trade silver futures contracts to take delivery of the physical on the futures contracts they trade. Speculative activity can have a significant impact on spot silver prices due to the great use of leverage taken by speculators. The changes in speculative positions in silver futures contracts tend to be much greater than the changes in other components of silver demand like industrial demand although the latter accounts for roughly 50% of total silver demand.

Accordingly, the impact of speculative flows on silver spot prices tends to be relatively more important and volatile, which, in turn, affect the value of SLV because the latter physically

This article was written by

Orchid Research profile picture
Orchid Macro focuses essentially on commodity and macro analysis, using quantitative tools. We conduct research on supply and demand trends across commodities. We also analyze global macro dynamics and their reflexive interactions with the commodity complex. With 10+ years of experience in macro and commodity research, Orchid Research seeks not only to deliver unbiased views and accurate forecasts, but also to identify trade opportunities generating α.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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