In this article in Seeking Alpha, Silver Price Rise Likely Historic, the author examines the Commitment of Traders report. This report is commonly abbreviated as the COT. The COT report shows the current positions in gold and silver futures of the Commercials. The Commercials are large entities, according to their filing statement with the US Commodity Futures Trading Commission, “is commercially… engaged in business activities hedged by the use of the futures or option markets.”
Since these Commercials have enormous financial strength they often determine the direction that markets go in.
We have frequently discussed here at www.preciousmetalsinvesting.com it is the paper price of silver and gold in the market that determines the spot price rather than other factors like cost of mining, supply, demand, etc. Since the ratio of physical gold or silver to the paper gold or silver is estimated by some analysts at 500 paper ounces to an ounce of physical precious metal it is not hard to see why this “paper” value of the precious metals is so widely divorced from what many feel is the “real” value of the physical precious metals.
In this article the author contrasts his method of using the COT reports which uses the SIZE of the positions to help gauge what is really happening behind the scenes. Often what we see seems contrary to what you would expect.
There are some interesting points that illustrate these inconsistencies. Looking at just the numbers it might appear that the Commercials are holding a short position. However when you consider the size of the positions in addition you see that the commercials are holding a net long position in silver. Meanwhile JPMorgan and Shanghai Futures exchange continue hording silver at a record pace. JP Morgan has been stockpiling silver for two years. Their silver holdings are the highest in history.
Look at all of the factors and all of the large financial players in the silver market. They all seem to be saying that silver is getting ready to take off.
That’s why the author of this article believes we are at the start of a silver price rise that will likely be historic.
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