Silver… Light at the End of the Tunnel?
Wednesday, July 10, 2013 at 02:59AM
Silver Prices

David Franklin and David Baker

Silver’s year-to-date performance has been the worst among all commodities, falling 35% from January to June 30th this year. It’s been a rough ride for those who have held on, but recent news should give silver investors a reason for some renewed optimism.

The news relates to recent filings that have revealed a dramatic change in the positioning in the silver futures market and ownership of the iShares Silver Trust (SLV).

In the COMEX futures exchange, the “Commercials” category of traders, made up of large banks, has traditionally held significantly large “short” positions – which means that the banks are either hedging an existing silver position or betting that silver will depreciate. The recent COMEX disclosures have revealed a staggering drop in the “Commercials” outstanding short positions, however – representing a decrease from 259 million ounces in February 2013 to 20 million ounces as of the last Commitment of Traders (“COT”) report released June 25th.1  This represents a significant change in the positioning of the silver futures market, and also suggests that previously ‘short’ participants have exited the “short silver” trade altogether. This drop actually represents the cumulative purchase of approximately 240 million ounces of ‘long’ silver contracts to cover the previously mentioned short positions, so despite silver’s price decline, the silver futures market has actually seen an abundance of buying.

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