Ted Butler: Massive Improvement in Silver, Gold Futures Structure

From Ed Steer's latest daily:

"If there is one word to describe the changes in this week's COT for gold and silver, it is spectacular. Make that two words, spectacularly bullish. Rarely do we see the reductions in speculative long/commercial short positions witnessed this week. The total commercial net short position was reduced by 6,400 contracts in silver and by 42,500 in gold. Even for someone who believes (me) that the commercials control and manipulate the price of both silver and gold, I stand somewhat in awe of how brazenly and collusively the commercials pulled off this recent sell-off rig job. I don't use the word collusively loosely. In both gold and silver, all the commercial categories, the big 4, the big 5 thru 8, and the raptors, seemed to divide evenly the speculative selling they were able to induce. I don't know how that could be accomplished so efficiently without collusion."

"In silver, the total commercial short position dropped to 29,200 contracts, the lowest level since April 2009, when silver traded at $12. The big 4 shorts (JPMorgan) bought back more than 2,200 short contracts, reducing that concentrated short position to the lowest level since October 2006, when silver traded at $11. The raptors (the smaller commercials apart from the big 8) bought 3,400 of the 6,400 commercial contracts bought during the reporting week, increasing their net long position to 12,400, their largest since last November. The 5 thru 8 largest commercial shorts bought the balance, reducing their net short position to among the lowest in years. The obvious takeaway here (aside from all the commercials behaving collusively) is that the commercials are all buying because they expect the price of silver to be higher in time. That's what you should expect as well."

"As painful as these deliberate sell-offs may be, they are also setting the stage for a rally of monumental proportions in silver. That's the essence of the COT. I make a point of telling you what the price of silver was the last time the short position was as low as it is now because I believe you should look at silver as if it is $11 or $12. The beauty of the COT is that it does not consider price; all it is concerned with is structure. If the structure indicates a large speculative long/commercial short position, then the danger of a significant sell-off looms large. If there is a small historical speculative long/commercial short position, a large price rally would seem to be in the cards. Currently, there is a small historical speculative long/commercial short silver position."