Oh boy, the COT numbers just were reported and they are stunning in their revelations...

The Commitment of Traders Report

Silver

*The large specs reduced their long positions by 1,148 contracts and increased their shorts by 4,468 contracts.

*The commercials increased their longs by 2,026 contracts and decreased their shorts by 6,815 contracts.

*The small specs increased their longs by 496 contracts and increased their shorts by 3,721 contracts.

Gold

*The large specs increased their longs by 1,929 contracts and increased their shorts by 25,113 contracts.

*The commercials increased their longs by 4,327 contracts and decreased their shorts by 24,244 contracts.

*The small specs decreased their long positions by 415 contracts and increased their shorts by 4,972 contracts.

The specs have been pouring in on the short side, while the commercials have been doing a good deal of covering. With the fundamentals so bullish, we have a set up for a violent price reversal at any time.

So how does this input equate to the "silver story" presented above?

We know from last week's COT report and what the open interest has been doing, the strong hand buyers have been doing just that. The commercial long position went up again, which confirms these buyers are contining to take on JPM.

That the commercial short postion went down so much suggests JPM, while selling to set the tone for the day, could have been covering some of their shorts. Hard to say.

What is so stunning is the total increase in new short positions by the large and small specs as of last Tuesday. This means these strong hand buyers may soon have the support of these new spec shorts should the price of silver move up a a fair amount and the spec shorts are the ones who are doing the covering. IF JPM is trying to cover at these levels and is not going to try and force silver to break its base, there could be a vacuum right above the market with no nearby sellers. This could set up a dramatic spike to the upside.

Gold has rallied to $1581 and silver to $28.75 in Access Market trading.

Dave from Denver...

HOLY HEDGE FUND SHORTING

I knew the hedge funds were piling onto the short side of gold and silver and that's why the metals have been getting slaughtered recklessly like this, but increase in the hedge fund gold short position is unprecedented, as far as I know. In other words, I don't think I can ever recall even the big banks increasing their gold short by this much (there may be one time I can think of when the big bank increase in short interest was larger).

The hedge funds increased their gold short by 25k, while the banks covered 24.2k. The small specs increased their short position by 17%, 4.97k. This is unbelievable.

Silver is pretty extreme as well. The large specs increase their short position by 4.4k, or 50%. The banks covered 6.8k contracts. The small specs increase their short position by 3.7k, or 31%.

I knew the hedge funds were shorting the snot out of this market but this is beyond what I was expecting. This is setting up the mother of all short-cover rallies. The small specs are going to get annihilated....Game on for those who have the capital to pile long into this entire sector.

***

Now from the well connected Andrew Maguire on what's been going on via CP dispatches today, which adds to the late day bullish drama...

12:34p PT Friday, February 22, 2013
Dear Friend of GATA and Gold:

London metal trader and silver market whistleblower Andrew Maguire today tells King World News that Eastern central banks have used the recent smashdown in gold to acquire hundreds of tonnes and that the smashdown is actually a "bubble short position" likely subject to a "violent" reversal. An excerpt from the interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/K
WN_DailyWeb/Entries/2013/2/22_Ma...

***

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/2/22_Wh...