Friday, March 9, 2012

Commercials Cover 44 Million Ounces of Silver Shorts in Latest Raid

Over the past 6 weeks, we have documented the massive increase in the commercials' net short silver position from 20,382 net shorts to 44,593 net shorts- an increase of 24,211 contracts or 121 million ounces of silver to their naked short position in only 6 weeks!
With last Wednesday's massive $4 smash that saw 225 million ounces of paper silver dumped on the market in under 30 minutes, we have been anticipating a massive short covering and reduction of these newly acquired shorts to be revealed in today's COT report.  The latest COT report is out, and it didn't surprise in the least.

The commercials covered (reduced) a net 8,797 silver contracts in the week ending 3/6/12, a reduction of 43,985,000 ounces in their net short position.  This is a reduction of more than a third of the massive increase in net shorts over the past 6 weeks by the cartel in the the artificial correction that began last Wednesday at 10:00am.  However, the commercials' silver futures positions now stand at 36,329 longs with 72,125 shorts, or 35,796 net shorts.  This is still 76% higher than the 20,382 net shorts seen in late January.  The cartel will either need to engineer substantial further raids to be able cover the majority of this 179 million ounce outstanding short position, or they will at some point have to break precedent and cover INTO A SILVER RALLY.  Should the commercials (allegedly JP Morgan) have to begin covering their shorts into price strength (as they were forced to do in April of 2011) rather than price weakness (raids), the entire dynamic of the silver market will be changed.  While we don't expect this to happen quite yet, at some point it will unless the cartel is able to smash silver drastically below current levels to extricate itself from the remainder of its massive net short silver position.