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Discussing Comex Silver

74
Thu, Apr 5, 2018 - 10:42am

With the open interest in Comex silver blowing out to a new alltime high yesterday, we thought it best to discuss again what this indicates and what it doesn't.

As of yesterday's Comex close, the total open interest in Comex silver is at an alltime high of 241,135 contracts. This blows away the previous alltime high seen on April 20 of last year at 234,787 contracts. Let's first hit the basics...

At 241,135 contracts, total Comex open interest represents 1,205,675,000 ounces of digital silver. The entire world will produce about 825,000,000 ounces of silver this year so this open interest is now at a record 146% of global mine supply. To understand how ridiculously over-leveraged this derivative market has become, compare Comex silver to Comex gold and Comex copper:

  • Comex gold OI 500,627 contracts = 50MM digital ounces vs mine supply of 90MM ounces = 55% of global mine supply
  • Comex copper OI 289,814 contracts = 7B pounds vs 40B pounds of mine supply = 18% of total mine supply

OK, now that you have some sense of the scale of this madness, let's move on. How about some history?

April 20, 2017 was a Thursday. This means that two days earlier, with Comex silver OI at 227,984 and price at $18.40, there was a CoT survey. And what did this CoT show last year?

Large Spec Long = 128,378 Large Spec Short = 24,491 NET LONG 103,887 contracts

Commercial Long = 46,878 Commercial Short = 163710 (an alltime high) NET SHORT 116,832 contracts (also an alltime high)

So, with Large Specs NET LONG nearly 104,000 contracts and the Banks et al NET SHORT at an alltime high, what do you suppose happened next???

Of course you already know. The Specs began to dump longs into the May17 contract expiration and price fell for next 13 consecutive days. The total decline was $2.03! Total open interest fell back to a low of 188,527 on Day 10 of this selloff and The Banks had fleeced The Specs once again.

Now let's compare this to present day by making some reasonable projections for tomorrow's updated CoT.

Last week's survey taken March 27 showed:

Large Spec Long = 60,786 Large Spec Short = 74,443 NET SHORT 13,657 contracts

Commercial Long = 82,087 Commercial Short 89,439 NET SHORT 7,352 contracts

You can already see the radical difference one year and $2 in price has made. And if last April's CoT virtually assured that the next move would be a washout of the Spec longs, why wouldn't the current CoT virtually assure that the next move would be a washout and squeeze of the Spec shorts?

But let's not stop there. Last week's CoT was a snapshot from five market days ago. Here's how things have changed since:

March 28: Price down 29¢ and OI up 8,800

March 29: Price up 2¢ and OI up 900

April 2: Price up 40¢ and OI down 900

April 3: Price down 28¢ and OI up 4,400

April 4: Price down 14¢ and OI up 8,400

Since total open interest rose on every sharp down day for price, it's very safe to conclude that the Large Specs have continued to pile into the short side of Comex silver at every opportunity. So, while last week's disaggregated CoT looked like this...

An updated CoT, based upon projected changes through yesterday (Wednesday), would look like this:

Now consider these points:

  • The situation compared to last April is the same...but it's the opposite. Just like last April, the Specs will eventually have to unwind positions ahead of the May contract going off the board. But this year, instead of dumping longs, they'll have to cover shorts!
  • If, at present, The Large Specs are NET SHORT something like 30,000 contracts, this likely places the Commercials into a NET LONG position for the first time in the recorded history of mankind.
  • So, for once, The Commercials would actually benefit from a price rally.
  • However, where sharp selloffs ALWAYS benefit the Bank desire to cap price, maybe The Banks won't allow a sharp rally for fear of igniting upside momentum. This must be considered, too.
  • But again, if outsized Spec long positions always lead to selloffs, why wouldn't this incredibly outsized Spec short position lead to a squeeze and rally?

So, we'll see what happens next. Maybe we'll need to move closer to the May18 expirations before the squeeze begins. If anything, we've been warning you for weeks that NOTHING IS GOING TO HAPPEN until The Specs begin to feel pressured by a price that rises through the 50-day, the 200-day and the key resistance level of $17. Until then, we're stuck rangebound and moving sideways.

But don't let the current malaise and price range distract you from this truly remarkable situation. Total Comex open interest is at an alltime high. The Large Specs are are building an unprecedented NET SHORT position. And The Commercials (the Banks) are now NET LONG for the first time ever.

A price rally is coming. This rally could be spectacular. The only question is whether or not The Banks will allow it to be.

IF The Banks play the usual game of swapping positions with The Specs, the mass of Spec shorts will be covered but then transferred back to The Banks. Price will rise but perhaps not more than the $2 it fell last year.

IF, however, The Banks stand down and simply hold their positions, this would force The Specs to buy and cover only amongst themselves. This limited amount of liquidity would have the potential to spike price in a rally the size and scope of which we haven't seen since the spring of 2011.

So, sit back and watch. These events will soon unfold and the record level of Large Spec shorts will begin to get squeezed. Once this begins, we'll all get to see the results in real time.

TF

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  74 Comments

AKA AuAgforever AIJ · Apr 5, 2018 - 10:47am
Michael Pento – Financial Crescendo in October of 2018
chocolatechiphorses · Apr 5, 2018 - 10:49am

Executive Order 6102 is a United States presidential executive order signed on April 5, 1933, by President Franklin D. Roosevelt "forbidding the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States".

Image result for gold coin horse images

billhilly · Apr 5, 2018 - 10:51am

...it is !

tonym9 · Apr 5, 2018 - 10:53am

TF: when does the may silver contract go off the board? 5/28/18?

Blythesshrink · Apr 5, 2018 - 10:53am

Here's the thing, if they only intended to let it rise say 2$, why would they have let OI get this large? They could already have flushed the specs and be well into the next rinse cycle. The fact that they haven't and the fact that they're actually going long makes me think something bigger is coming, but obviously I'm personally biased here. 

I think then that we have to assume then that the banks will now try and get as long as possible before the rinse starts - so we may well see a final big spike down before the squeeze begins just to draw in a load more paper shorts; they may well then find themselves completely fleeced just 24 hours later.

EDIT

Perhaps the large OI is to maximise the profit they can take on only a small dollar move up in Silver?

Mickey · Apr 5, 2018 - 11:00am

tks

wealthelf · Apr 5, 2018 - 11:04am

...time

silverflower · Apr 5, 2018 - 11:07am

that this will not be the case:

"IF The Banks play the usual game of swapping positions with The Specs, the mass of Spec shorts will be covered but then transferred back to The Banks. Price will rise but perhaps not more than the $2 it fell last year."

The banks want and need to keep control about these fake markets as long as they can drain the pockets of the public. Because if they give up the whole BS bubble recovery story of the recent years is finished. I don't know what will be the trigger that ends this biggest financial bubble in history but my gut feeling tells me it will not be caused by a delivery issue at the COMEX or some other calamity within the precious metal space. On the other hand, there certainly is a reason behind JPM's huge silver stash. This criminal institution does know a lot more about the future of this current financial system than me little nobody. Maybe after 7 years standing the permanent bombing and smashing of the paper silver market my imagination of a raising silver price has been erased. Call it hopeless. However, if necessary I take my stash with me into the grave. In other words, I will never ever sell one single ounce for the current paper price. Not gonna happen.

Angry Chef · Apr 5, 2018 - 11:08am

...the Worst Possible Reason

https://wolfstreet.com/2018/04/04/worlds-most-wanted-bank-whistleblower-...

Read this article and let this sink in. This is the reason IMHO the West is going to collapse. When Banks supersede Laws. And Governments have to answer to Banks ( having to borrow at interest instead of creating the currency ). Who really is the Sovereign here ?

AgAuMan · Apr 5, 2018 - 11:23am

rounding out the top 10

10 - RUNNING AT THE BEACH
kaiserwongze · Apr 5, 2018 - 11:29am

Check out GOLD (randgold). Supremely ugly chart.

This and gold futures are Crispin Odey's biggest holdings.

Smells of liquidation.

tonym9 · Apr 5, 2018 - 11:31am

It "delivers" in May...thus the contract is May18.

It goes off the board three weeks from tomorrow and trades First Notice on Monday the 30th.

AGXIIK · Apr 5, 2018 - 11:32am

 Many states are making the sale of gold and silver exempt from capital gains taxes. The IRS is not.

Gold long term capital gains is 28%

Short term gains are ordinary income Combined fed and state rates can be 40% plus

For sake of argument, lets say you'd bought 2000 ounces of silver for $14 an ounce back when silver was in that price range.

Less than later you sold the silver for $20 an ounce during a quick price bounce. That happened in 2016 if I recall

Because this was silver bullion as opposed to ASE, you get a 1099 from the dealer Yes, they will issue one.

You plan to use that $40,000 cash to buy a car.

Your net short term capital gain is $12,000 with a 'all in' fed and state tax rate of 35% on that sale but

You end up paying $4,200 in taxes based on the short term gain in the sale. 

Your net proceeds after taxes is $35,800. Due to the taxes paid you have to downgrade your selection of a car

The $12,000 in gains kicks you to the next tax bracket, putting your income in danger of bracket creep erosion.

This sort of thing is bullshit on many levels and I'd spent untold hours railing against the inequity of this situation

Here is the alternate to the taxable gains.

You have $40,000 in cash and want to buy a car. That model is offered on a blue light special at a dealer for $28,000 during the year end close out, saving you $12,000. Your $40,000 of FIAT is now able to buy $28,000 of car so you buy that Ford you wanted.

Could you interpret that increase in the buying power of your money as a capital gain?

No.

 But still, your dollars are buying the same item for $12,000 less which, in essence, made your cash worth considerable more in that moment in time. I assure you that if you traded silver for that car someone would be calling the US treasury to figure this out. If you paid for the car in much appreciated Bitcoin you would most certainly be narked out and made responsible for gains on that trade in crypto.

If the IRS and lawmakers had a clue they would make gains on silver and gold untaxed, just as states are. I wonder if that will ever happen. Maybe when golden unicorns fly out my ass.

Just my 2 cents worth of railing against the criminal nature of all markets, trading and taxes. If possible I will take advantage of paying for things in bullion rather than cash. Like my contractor who's doing work for me now. He's got it figured out too. Fuck the governments, all of themangry

silver10sguy · Apr 5, 2018 - 11:34am

Q keeps talking about big events in April. The Inspector General's report is coming out soon. If the elites get arrested does the dollar take a huge nosedive in the short to medium term? A sharply lower dollar with a silver short squeeze sounds extraordinarily exciting! I imagine something historic happening would also increase money flowing into crypto currencies. Yep, back up the truck again! 

AGXIIK · Apr 5, 2018 - 11:41am

 Many states are making the sale of gold and silver exempt from capital gains taxes. The IRS is not.

Gold long term capital gains is 28%

Short term gains are ordinary income Combined fed and state rates can be 40% plus

For sake of argument, lets say you'd bought 2000 ounces of silver for $14 an ounce back when silver was in that price range.

Less thana year later you sold the silver for $20 an ounce during a quick price bounce. That happened in 2016 if I recall

Because this was silver bullion as opposed to ASE, you get a 1099 from the dealer Yes, they will issue one. 

Did you keep your purchase receipt as proof of purchase price?

You plan to use that $40,000 cash to buy a car.

Your net short term capital gain is $12,000 with a 'all in' fed and state tax rate of 35% on that sale .

You end up paying $4,200 in taxes based on the short term gain in the sale. 

Your net proceeds after taxes is $35,800. Due to the taxes paid you have to downgrade your selection of a car

The $12,000 in gains kicks you to the next tax bracket, putting your income in danger of bracket creep erosion.

This sort of thing is bullshit on many levels and I'd spent untold hours railing against the inequity of this situation

Here is the alternate to the taxable gains.

You have $40,000 in cash and want to buy a car. That model is offered on a blue light special at a dealer for $28,000 during the year end close out, saving you $12,000. Your $40,000 of FIAT is now able to buy $28,000 of car so you buy that Ford you wanted.

Could you interpret that increase in the buying power of your money as a capital gain?

No. But if the IRS had their way it would be. VAT is one way to level the playing field and ends up frigging everyone.

 But still, your dollars are buying the same item for $12,000 less which, in essence, made your cash worth considerable more in that moment in time. I assure you that if you traded silver for that car someone would be calling the US treasury to figure this out. If you paid for the car in much appreciated Bitcoin you would most certainly be narked out and made responsible for gains on that trade in crypto.

If the IRS and lawmakers had a clue they would make gains on silver and gold untaxed, just as states are. I wonder if that will ever happen. Maybe when golden unicorns fly out my ass.

Just my 2 cents worth of railing against the criminal nature of all markets, trading and taxes. If possible I will take advantage of paying for things in bullion rather than cash. Like my contractor who's doing work for me now. He's got it figured out too. Fuck the governments, all of themangry

being a bit of an arrogant asshole this AM I'll leave this as a dupe because it deserves repeating

Angry Chef · Apr 5, 2018 - 11:49am

...November

And once we get back to sound money. Lobbying has to go. Usury, Lobbying, and the Rule of Law.

https://russia-insider.com/en/bolton-adelsons-poodle-and-trump-needs-ade...

abundance · Apr 5, 2018 - 12:01pm

eom

abundance · Apr 5, 2018 - 12:02pm

Honduras, Jesuits, gold companies, Bundy related, ..thanks for posting

https://www.roguemoney.net/blog/2018/4/4/is-gaddafi-gold-in-honduras

canary · Apr 5, 2018 - 12:07pm

Is to suppress prices or to make profit...

If silver price stops at $18.....suppression is their goal

If silver goes to to $22....it's the profit.

In my opinion, because of a questionable gold COT....the suppression of silver will continue.

Search · Apr 5, 2018 - 12:10pm

Is nothing more than a coordinated attempt by the usa and its banks to send a f you to china, of course this emboldens both sides.

We saw this during 2007 and 2008 only to find out years later that the fix was in. Eg geithner telling banks they would cut rates after the bernank cut the discount rate instead of the fed funds rate in 2007. We did not find that out jntil he released his book.

It IS really that pathetic now. Ask 100 people what would happen after the china news and 100 would say markets would fall. Only the ones who knew it was rigged would say otherwise.

kaiserwongze · Apr 5, 2018 - 12:17pm

Recall yesterday when gold was teasing 1350's, silver was lagging and miners were barely positive.

Today is the opposite. Gold is down 7-8 points from NYSE close, miners are barely positive and silver is up.

lakedweller2 · Apr 5, 2018 - 12:25pm

If the government's objective is a Fascist Oligarchy, then the people will be cleaned out piece by piece, with wealth concentrated in the elites.

Don't rule this option out as nothing has stopped them so far. 

Angry Chef · Apr 5, 2018 - 12:31pm

Agreed Lakedweller2. And we'll be complicit in our own demise.

https://www.youtube.com/watch?time_continue=737&v=_Sot6afSKps

indiana rod · Apr 5, 2018 - 12:38pm

James Turk says we are going to $22.00 silver next month. He said the head and shoulder pattern is spectacular.

If we go to $22.00 next month, the months beyond will be spectacular.

brolgaboy · Apr 5, 2018 - 12:44pm

extremely well articulated too!

BUT....can't help but think the COT is the new way to paint the tape.

brolgaboy · Apr 5, 2018 - 12:44pm

Rose or Thomas?

brolgaboy · Apr 5, 2018 - 12:46pm

And maybe Bubba

lakedweller2 · Apr 5, 2018 - 12:50pm

Could be 10 or more front runners until some lucky breaks happen...

bently · Apr 5, 2018 - 1:14pm

Honestly don't recall seeing this in a long, long while. Perhaps speaks to the extreme nature of hte COT... 

bently · Apr 5, 2018 - 1:18pm

Which is why price continues to find a floor near $16.20.

Recall how price falls when every Spec who was going to buy has bought. Well now, just about every Spec who is going to sell has sold.

And be sure to note, too, that copper is up 6¢ or slightly more than 2%. This is helping, as well.

Notice: If you do not see your new comment immediately, do not be alarmed. We are currently refreshing new comments approximately every 2 minutes to better manage performance while working on other issues. Thank you for your patience.

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