View Full Version : Chinese buying silver legally on government recommendation

26th August 2009, 01:06

On a very short-term basis we do not like it when the silver LCNS is rising as the price of silver is declining. The opposite is usually more constructive. For now the numbers are not frightening, however. Since August 4, COMEX commercial traders have added 4,080 contracts (10.5%) to their collective net short positioning while silver corrected a net 63 cents (4.3%). Neither figure is out of bounds in a low-liquidity summer environment.

What is more bothersome, perhaps, is that for the same two-reporting week period (measured on COT reporting Tuesdays) silver shows us a net 4.3% loss in price as the COMEX futures open interest rose a net 4.1% to 103,527 contracts open.

When there is apparently more desire for commercials to hedge collectively with both a falling price and a rising open interest, that has signaled significant price pressure in the recent past. Especially just ahead of OTC options expiry. (OTC options expire this coming week on August 27. Don’t be surprised if we see pressure on silver until then.)

So, for short-term traders, our antennae must go up and our answer must be to watch the GSR carefully for signs of further deterioration (higher GSR). That, and to maintain our “near resistance” trailing stop strategies.

Longer term, and as an investing prime directive, we remain and will likely continue to be very staunchly bullish on physical silver metal, selected silver producers and silver ETFs. For our longer-term positioning we are apt to treat most any strong to very strong dip in silver as an opportunity to add to that positioning as soon as we believe the dip has exhausted itself.