COMEX Silver Positions Since May 2008 : Ed Zimmer

http://seekingalpha.com/article/164055-comex-silver-positions-since-may-2008

http://cmegroup.com/trading/energy-metals/files/Silver_Stocks.xls

The following is based on a study of the COMEX silver positions since May of 2008. Information is taken from COT weekly reports.

The Commercial Short position in silver has reached what may be considered a tipping point as Comm Shorts added another 3400 short positions in the last reporting week, boosting the total short to 90,000 contracts or 450 million ounces of silver sold short. This comes at the same time that total silver stocks in the COMEX warehouse have fallen below 115 Moz. Only half of that amount is registered for delivery against short contracts, meaning the Commercial Short position is leveraged nearly 8 to 1. Other points to consider:

·Commercial Shorts comprise 82% of all short positions

·Commercial Short/Long ratio is at 3.48 for the second straight week

·Difference between Friday Close and Commercial short calculated at negative 1.86, the highest level since Oct 31, 2008.

In July of 2008, the price of silver collapsed, falling from over $18 ounce to under $9 as of late October of that year. In July of 2008, the total Commercial Short position was 101,000 contracts or 505 Moz short vs 30,000 long positions. By October, the Commercial Short position had fallen to 56,000 vs 33,000 long positions.

In July of 2008, the Commercial Short/Long ratio was between 3.31 and 3.49 for three consecutive weeks . The difference between Friday's close and Commercial Shorts was calculated at negative 0.84 to negative 2.24 for the same period.

The upshot is that there is a tremendous negative pressure on the price of silver, being exerted by a few (less than 10) Commercial traders who are not only backstopping every long position being taken this week, but are also backstopping their own long positions. Small and Large traders together only added 1800 positions (long) and were a combined negative 500 on short positions (total of 2300 positions). Commercial Shorts added 3400 short positions and 1000 long positions. In other words, the silver market was all about the Commercial Shorts running the show this past week.

Total contracts that are out on the COMEX rose by 20 Moz this week to more than 640 Moz, which is almost as much silver as was mined in all of last year (2008 total mined silver was 670 Moz). It is also 140 Moz more than published reports of silver stocks in existence at the current time.

If it follows the pattern from last year, the Commercial Shorts will add more short positions this week to break the silver price and send it plummeting. If that happens, expect the Commercial Shorts to actually add long positions as it falls while exiting their overextended short positions as they pass through. If physical demand supports the price instead, the Commercial Shorts will continue to add to their holdings to push the 3.5 ratio.

One significant difference is that last year the COMEX stocks were more than 130 Moz,
today they are 115 Moz. This week should be telling in which direction the silver market goes.

Note:
Registered for potential delivery 57 Moz. and steadily declining.