A Contrarian’s Case: Silver Prices Setting Up To Surge In 2018

Money Managers Making Case for Higher Silver Prices

If you are looking for the next big trade, pay close attention to silver prices. The gray precious metal could be setting up to reward investors immensely in 2018 and beyond. As bold as this may sound, silver could be the next millionaire maker.

Understand that there’s currently a significant amount of negativity towards the precious metal. As a contrarian trade, it could be worth a look.

To get some perspective on how badly silver is unwanted, look at the Commodity Futures Trading Commission’s “Commitments of Traders” (COT) report released on the weekly basis. More specifically, in this report, there’s a section that states how much exposure money managers have to silver. It’s labeled “managed money.”

As of February 27, managed money owned (long) 36,647 silver futures contracts. In the beginning of 2018, they were 54,304 silver futures contracts. In matter of two months, their bullish bets declined by over 32%. (Source: “Commitments of Traders,” Commodity Futures Trading Commission, accessed March 6, 2018.)

Remember that one futures contract represents 5,000 ounces of silver. So money managers have exposure to 183.23 million ounces of silver now, compared to 271.52 million at the beginning of the year.

Their bearish bets on silver (short) amounted to 53,082 futures contracts on February 27. On January 2, this figure was 38,501.

Simple math: money managers are short 265.41 million ounces of silver now, versus 192.50 million at the beginning of 2018. This means their short exposure has increased by close to 38% in two months.

While these numbers may not mean much to the naked eye, it’s critical to watch.

Money managers are net short on silver. This means they don’t like the precious metal and think silver prices aren’t going higher. They are net short 16,435 contracts, or 82.17 million ounces. Money managers have never been this short on silver in history, according to the COT report.

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Disclaimer: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and ...

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Michael Molman 2 years ago Contributor's comment

I saw the same report from COT which showed speculative accounts turn bearish on #silver for the first time in decades, which leaves that many more buyers when the market turns. However I will wait to go long on silver until prices show a breakout