Go Long!

Go long! I shout. No, not a “hail Mary”, but it should be just an extra point kick to win the game. It seems so easy, if I had an extra few hundred million I would do it myself. But, I know that there are plenty of hedge funds and individuals where investing a few hundred million on a surefire big win would be a “no-brainer”.

So why hasn’t that happened with silver? I guess it doesn’t matter as much why it hasn’t happened to date as why not now? Now, when managed money traders (MMTs) are short 369 Mozs. of silver on the Comex. In the past it has been the commercial traders that sell to the MMT as the silver price rises. The managed money traders being mostly technical traders who seem to have a trading algorithm that the commercials can use to lead them in and out of positions by their collective noses.

I believe that one of two things will happen soon- 1. The commercials will start selling again on a silver price increase taking some more money from the (MMTs); OR 2. The commercials will back off and not sell, but then who will and at what price? Either way traders that want to make some real money should buy. We all know that the MMTs are not hedging, they are not going to deliver any silver, they have to buy back these contracts. I am a subscriber/fan of Ted Butler, so that is where I have gotten most of my information and from which I have formed my silver market opinions which Butler may or may not agree with. He has pointed out that this 369 Moz. short position iis over four months of annual silver supply and no other commodity has this kind of outsized short position. I am not even sure that comparing the position to annual supply is the right way to look at silver. After Industrial Fabrication and Jewelry & Silverware there are only 160 Mozs. (average over the last 6 years) of silver available for investment demand. So, since the MMTs are strictly speculators you could say that they are currently short over 2 years of silver supply for investment. Yes, as the price goes up to $30, $50 or $100/oz there probably will be some less silver used for fabrication demands, but that doesn’t take away from the fact that short covering and investment demand could and should overwhelm the silver supply available.

Again, who sells into this market? And why and at what price? I know there is some debate about the “why”, but silver is such as small market that it really shouldn’t matter. If there were 10 million shares of SLV (or other EFTs) purchased each month for the next 3 months I think we would see a very tight physical market get too tight and prices soar. This is a case where the COT report and logic should give us all the direction for the best next investment- Silver, go long!