If the setup in gold looks bullish, then I’m not sure how to describe what we’re seeing with silver.
Maybe super-bullish? Let me explain…
Last week, we noted the “smart money” had turned bullish on gold. The CFTC Commitment of Traders (COT) report showed commercial traders (a.k.a. the smart money) had the lowest net-short position in gold in over two years.
The smart money net-short position (short futures contracts minus long futures contracts) had fallen to 111,000 contracts…
Most of the time, when gold is at a relatively low level and commercial traders expect it to be higher soon, the smart money net-short interest often drops to less than 200,000 contracts.
So, a net-short interest of 111,000 contracts is quite bullish.
Last Friday, the CFTC reported the commercial traders net-short position fell even more to 108,000 contracts.
It shouldn’t be a big surprise that the price of gold has rallied sharply over the past two weeks.
The shiny yellow metal was trading for $1,700 an ounce in mid-July. It traded yesterday above $1,790. And if the smart money is right, then gold should be a lot higher in the weeks and months ahead.
But as bullish as the smart money is on gold, it’s even more bullish on silver.
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The most recent CFTC report shows that as of last Tuesday the commercial trader net-short interest in silver futures contracts is just 2,000 contracts.
Meaning that the merchants, miners, explorers, and bankers in the mining sector are not hedged much at all against a downside move in silver.
This is the smallest net-short position the smart money has had in silver since June of 2019 – just before silver rallied 33% in three months.
Of course, that doesn’t mean the situation will play out the same way this time around. Past performance is not a guarantee of future results…
But if the brightest minds in the silver industry are bullish on the metal’s prospects – and the smart money is almost always right – then maybe we ought to be bullish too.
Traders should take advantage of any weakness in silver and use it as a chance to buy.
Best regards and good trading,
Will you be buying silver because of what the “smart money” says? Or are you bearish on silver?
Let us know your thoughts – and any questions you have – at [email protected].