Discussing COMEX Silver-Craig Hemke

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by Craig Hemke, Sprott Money:

With the open interest in COMEX silver blowing out to a new all-time high yesterday, we thought it best to discuss again what this indicates and what it doesn’t.

As of yesterday’s COMEX close, the total open interest in COMEX silver is at an all-time high of 241,135 contracts.

This blows away the previous all-time high seen on April 20 of last year at 234,787 contracts. Let’s first hit the basics…

At 241,135 contracts, total COMEX open interest represents 1,205,675,000 ounces of digital silver. The entire world will produce about 825,000,000 ounces of silver this year, so this open interest is now at a record 146% of global mine supply.

To understand how ridiculously over-leveraged this derivative market has become, compare COMEX silver to COMEX gold and COMEX copper:

COMEX gold OI 500,627 contracts = 50MM digital ounces vs mine supply of 90MM ounces = 55% of global mine suppl
COMEX copper OI 289,814 contracts = 7B pounds vs 40B pounds of mine supply = 18% of total mine supply

OK, now that you have some sense of the scale of this madness, let’s move on. How about some history?

April 20, 2017 was a Thursday. This means that two days earlier, with COMEX silver OI at 227,984 and price at $18.40, there was a CoT survey. And what did this CoT show last year?

Large Spec Long = 128,378 Large Spec Short = 24,491 NET LONG 103,887 contracts

Commercial Long = 46,878 Commercial Short = 163710 (an all-time high) NET SHORT 116,832 contracts (also an all-time high)

So, with Large Specs NET LONG nearly 104,000 contracts and the Banks et al NET SHORT at an all-time high, what do you suppose happened next???

Of course you already know.

The Specs began to dump longs into the May17 contract expiration and price fell for next 13 consecutive days. The total decline was $2.03! Total open interest fell back to a low of 188,527 on Day 10 of this selloff and The Banks had fleeced The Specs once again.

Now let’s compare this to present day by making some reasonable projections for tomorrow’s updated CoT.

Last week’s survey taken March 27 showed:

Large Spec Long = 60,786 Large Spec Short = 74,443 NET SHORT 13,657 contracts

Commercial Long = 82,087 Commercial Short 89,439 NET SHORT 7,352 contracts

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