Thursday, August 15, 2013

Greatest Potential Ever for a Massive Short Squeeze In Silver


The July CFTC Commitments of Traders report reveals the greatest potential ever for a short squeeze in silver, says market analyst Adam Hamilton of Zeal Intelligence.
“This past week, total futures-speculator silver shorts were still 46.2k contracts,” said Hamilton. “To merely mean revert back down to the post-stock-panic average of 21.5k between 2009 and 2012, they will have to buy 24.7k contracts.”
“This is 123.7m ounces of silver, the equivalent of 3/8ths of SLV’s entire holdings today. And the faster silver rallies, the quicker this buying to cover will unfold. Case in point, take a look at 2005.”
“Back in August 2005, total spec silver shorts soared to 45.2k contracts. Even though silver only traded near $6.75 then, speculators were extremely bearish on the white metal. These periodic episodes of exceptional pessimism often coincide with silver’s summer seasonal lows.”
“Total longs were relatively low then too. And high spec shorts plus low spec longs is very bullish, the breeding ground for major uplegs.”
Basically, silver speculators have left themselves exposed to a snap back in the price in the other direction, i.e. up rather than down.
On past precedent from 2005, this leaves us open to a 124% rally in the next 8 months.
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