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.