After a large decline in the dollar this week, both gold and silver continued to surge on Friday, with gold gaining close to $30 and silver rising 30 cents. On the heels of that trading, below is an important update on the war that is raging in the gold and silver markets.
The following charts are from Jason Goepfert at SentimenTrader.
Commercial Short Positions In Silver Hit All-Time Record High!
King World News note: Below you can see the commercial hedgers position in the silver market market. Note that commercial hedgers been adding aggressively to their short positions and have hit a new high in terms of their overall shorts (see multi-year chart below).
The commercial shorts are at a level that raises serious concern. In fact, the commercials now have their largest cumulative short position in history. The last time the commercials held this large of a short position in silver was in 2004. Again, that does not mean that the price of silver cannot head significantly higher in the short-term.
The next chart takes a longer-term look at silver…
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King World News note: Sometimes it’s important to take a step back and look at the big picture in the silver market. Looking at the 23-year chart below, the commercials are now the most short silver that they have ever been in history (see fascinating 23-year chart below).
What is important to note on the chart above is that the last time the commercials were this short silver there was a brief 12.7 percent pullback in the price of silver, but over the next 18 months the price of silver more than doubled from the low of that pullback in 2004. So from late November of 2004, when the price of silver fell to about $6.70, the price of silver soared to $14.31 by early May of 2006. Nevertheless, the commercials now have historic short bets against silver and that is something that traders and investors should watch closely.
King World News note: Below you can see the commercial hedgers position in the gold market. There was essentially no change in commercial short positions reported for this week (see 10-year chart below). That does not mean that the price of gold cannot continue heading significantly higher in the short-term, but it does raise a caution flag.
KWN also wanted to share the following question and answer from Bill Fleckenstein about the wild day-trading commodity action in China as it relates to gold and silver. Some may be wondering about the impact it could have on gold and silver prices and Fleckenstein addresses that question quite succinctly.
Question: What effect do you think the current day-trader commodities mania in China is having on precious metals? And if that bubble pops as the China stock market’s did, do you expect a big correction in gold? Thanks!
Answer from Fleck: “Not much so far.”
King World News note: In closing, the commercials were never this concentrated in terms of their short position in gold until after 2008. This means there could still be a lot of room to the upside in the gold market, but the current leg of the advance is in a danger zone in terms of the commercial short position in gold. ***The last time legend Rob Arnott was interviewed on KWN he recommended a specific fund to the global listeners, including the ticker symbol. In less than 3 months that fund has returned more than a staggering 26 percent! Arnott again gave specific recommendations for the global listeners and he also discussed the coming inflationary carnage that is in front of us. To hear his latest recommendations you can listen to his powerful audio interview by CLICKING HERE OR ON THE IMAGE BELOW.
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