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Will dollar shorts result in still higher silver prices?

The big news among close watchers of silver was the COT report that large bullion banks increased their silver shorts on the COMEX by 3,000 contracts.  Ted Butler, known for his analysis of the silver market and COT positions, was “so shocked” that at first he thought there was a mistake.

Butler noted that the increase broke “the pattern of a reduction in the concentrated short silver position that had been in force for months.”  The prior reporting week registered a reduction of 1,300 contracts.

In the past, big increases in the bullion banks’ short positions have resulted in lower silver prices.  However, it remains to be seen if the bullion banks will continue adding to their short positions.  Even if they do, several times the bullion banks have suffered huge losses as silver marched higher.

The bullion banks have been playing their games for since silver was below $5 and now it’s above $36.  Further, there are other players in the game whose bets cannot be ignored.
According to Monday’s Financial Times, hedge funds and forex traders are betting record amounts against the dollar.  It they are right and the dollar goes down, that will put upward pressure on silver (and gold.)

Short dollar positions on the CME surged from 200,564 contracts for week ended 2/22/11 to 281,088 for week ended 3/1/11.  This meant that bets against the dollar on the CME rose $11.5 billion, $3 billion more than the previous record of $36 billion in 2007.

Further, speculators have added to their euro holdings in expectation that the ECB will raise interest rates in April.  Value of CME bets that the euro will rise against the dollar: $8.8 billion, largest since January 2008.  If you’re a euro bull, you’re a dollar bear.

Meanwhile, the bullion banks increased their bets against silver 3,000 contracts, which is about $540 million.  Increased bets against silver: $540 million; increased bets against the dollar $11.5 billion; value of bets euro will rise against the dollar: $8.8 billion (increase not given.)

It ain’t over until the fat lady sings.

4 Responses to “Will dollar shorts result in still higher silver prices?”

  1. Tony Williams

    Hi Bill,

    I was searching online for some information on “spot” pricing of American Silver Eagle Coins and found your site through Google. Just wanted to say, awesome job, great site, with very informative information.

    Thank You!

  2. Thomas Avery Blair EA

    Anyone who has read Keynes and understands the consequences of printing fiat money when monetized precious metals are still available must have had a financial lobotomy in the recent past.

    Out here on Main Street we are learning to make do with less and save more…not fiat dollars but small amounts of gold and considerably larger amounts of silver one can hold and control themselves as a viable hedge against expected “HI-Tax” consequences (“HI-Tax = Hyper-Inflation combined with ever-higher taxes).

    Getting more difficult to buy pre-1965 US silver coins, so more folks are now looking also at pre-1967 Canadian coins instead. Bullion rounds come with far too high a premium and any profit will not appear potentially until perhaps a year from now…Gold and Bullion rounds are for the wealthy…”survival silver” is poor-man’s gold these days.

  3. Harley tenelshof

    Thanks, Bill and CMI staff.
    Bill, your counsel in these troubled and uncertain times that we are living in are worth more than silver and gold.


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