Friday, October 7, 2011

Silver Shorts Cut Their Positions 50% In One Week

 We all knew that the silver short-consortium—we know who they are—would have to extract themselves.  That's one reason silver was driven down so hard.  But now with this action the 'catel' is in a position to allow silver prices to rise (without resulting in their destruction). 

On another related personal note: now is the time to shop for gold and silver miners but more on that in another post.


By Chris Mack
October 3, 2011

As we anticipated earlier this year, commercial shorts including JPM are finally within grasping reach of covering their positions and transitioning to net long. For more than a decade, the large commercial trading banks have been trapped with an enormous short position in silver as the price has risen from its lows near $3 to its May high of nearly $50. Most analysts expected the commercial shorts to be broken in a short squeeze, likely launching silver above $100. However, this short squeeze will not occur.

In September 2010 these traders began to aggressively cover their short positions. Since then, commercial net short positions in silver have been reduced from over 65,000 contracts to 24,262 as of September 27, 2011 - and falling from 40,708 just one week earlier.

The large September take down from the $40 price level to the $30 price level has completely wiped out the small leveraged speculators, which saw their net long positions crash from 18,170 the previous week to 8,837. Meanwhile, open interest is threatening to break below the 100,000 level - indicating that speculative money has abandoned silver and sentiment is extremely low amongst investors. The combinational one-two punch of the May takedown and September takedown served to transition contracts from speculators to the commercial shorts at a much lower average price than most analysts ever expected.

Read more here



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