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Market Report: Silver hammered

Market Report: Silver hammered

 

wealth.goldmoney.com /  BY ALASDAIR MACLEOD / MARCH 03, 2017

Gold and silver declined over the week, though their paths differed. Gold peaked in the early hours of Monday, briefly spiking above $1260.

Silver peaked at the same time, but maintained the higher levels until the European close yesterday, when a seller of 20,000 Comex contracts drove the price sharply lower. It was an interesting development, which tells us much about the silver market.

On Comex, the large four traders category late in February was net short about 78,000 contracts, while the managed money category was net long 77,000 contracts. We won’t know for sure how this jumbo sale has effected this balance until the Commitment of Traders report for the current period is issued on 10th March. But it appears that one of the large four (it had to be one of them because of the size of the transaction) took the view that flaky hedge funds, in aggregate net long of what they were short, could be panicked out of their positions. Furthermore, the timing of the sale tells us that these flaky longs are in the US time zone, and that the seller didn’t want to see his shorts absorbed by more solid European buyers, who might take the opportunity to add to their positions.

It is possible that the seller was a large hedge fund, but we can rule that as unlikely for several reasons. Firstly, the level of open interest is only slightly above the long-term average, and the technical position of the market would not be propitious for a speculative sale of this nature. Secondly, hedge funds usually sell one thing to buy another, for example, shorting gold might be a trading bet on a stronger dollar. This condition does not exist with silver. And third, when a money manager takes a large speculative position in silver, it is invariably on the long side.

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GNtechstockguru_2000003/03/2017, 11:56pm