Silver COT Report 11/2/12: Commercials Cover 9 Million Ounces of Net Silver Shorts into Price Raid

By SD Contributor Marshall Swing:

Silver COT Report 11/2/12:

Commercial paper added a significant 1,153 longs on the week and covered but -614 shorts to end the week with 46.37% of all open interest, an increase of +1.20% in their share since last week, and now stand as a group at 268,660,000 ounces net short, which is a decrease of just under 9,000,000 net short ounces from the previous week. 

 

Large speculators were forced out of 681 longs and added 1,238 short contracts decreasing their net long position to 181,085,000 ounces, a decrease in their net long position of just under 9.6 million ounces from the prior week.

 

Small speculators sold off a small 626 longs but also covered 778 short contracts for a net long position of 87,575,000 ounces a minor increase of 760,000 ounces net long from the prior week.

 

Overall, price did very little during this reporting period opening at about $31.70 and closing at $31.89 but with quite some volatility during the period.

 

At first glance, we might wonder what is going on with the major long purchases of the commercials but a look at the disaggregated commercials reveals these numbers to be mostly in the spreading category.  What is a surprise is the number of shorts covered by the producer merchant.  When we examine the number of longs sold by each of the speculators then those numbers just about equal out so the strategy must have continued from the previous week to shakeout speculator longs.  I can only deduce those speculators who sold longs also determined that bearish prices were coming in the near future.

 

Those speculators who sold longs and bought shorts were indeed correct as we saw the most massive raid on silver, this past Thursday by the silver commercials, since price reached a high around $35.44 a few weeks ago.  It is very doubtful those speculators were able to hold onto their shorts, Thursday, as price rose over 80 cents to a high of $32.69 Thursday morning and then was crashed to a low of $30.81 by noon on Friday.  The price rise would have tripped stops on shorts up to the high while what longs were bought into the price rise would have surely been decimated into the raid Friday morning as well as longs purchased in the previous 3 months after price rose above $31.

 

Price stands about $4.50 below its recent high but the producer merchant short position is still clearly dominant.  The numbers next week will be certainly interesting as far as what to expect for further price declines.

 

As always, for your convenience, if you would like to contact the CFTC and express your views on the commercial trader’s unfair dominant short position, I have provided you their phone numbers and I hope earnestly that you fill up their phone lines: http://www.cftc.gov/Contact/index.htm and email addresses as well:

 

[email protected]  Chairman Gensler

 

[email protected]  Commissioner Chilton

 

[email protected]  Commissioner Sommers

 

[email protected]  Commissioner O’Malia

 

[email protected]  Commissioner Wetjen

 

[email protected]  Director Meister

 

See you next week!

 

Marshall