Contents
- Silver Futures Recharge
- Goldman: Positioning Was Light Into the Turn
- Managed Money Returns
- CTAs Begin to Cover Shorts
- Physical Market Has Yet to Confirm
Goldman: Silver Futures Recharge as Positioning and Dollar Weakness Drive the Rally
Submitted by GoldFix
Silver and Gold are both called higher this morning with Silver leading the charge after a lackluster day yesterday. As of this writing Silver is up 4.9% at 64.38 up $3.00. Gold is lagging its sister up 1.8% ($78) at $4,318.
Both metals are experiencing both physical buying out of London as well as algorithmic buying out of multiple places.
The algo buying is reportedly CTA money covering shorts along with good old fashioned front running of shorts in this torrid rally.
Positioning Was Light Into the Turn
Silver entered the end of July with relatively light speculative positioning, leaving the market vulnerable to a sharp move once the macro backdrop improved. Goldman Sachs notes that Managed Money net length on July 28 stood at only a 3% two-year rank in notional terms, meaning speculative exposure was near the bottom of its recent range. As July turned into August, an incrementally dovish FOMC meeting, intervention in the Japanese yen, and a reversal in oil prices combined to weaken the dollar and lift metals. Between July 28 and August 5, the DXY fell 1.7%, while COMEX silver gained 8.3%, outperforming gold’s 5% rise and the 7.6% advances in both platinum and palladium.
Managed Money Returns
Goldman believes Managed Money gross longs were probably an important driver of the silver move. Aggregate silver open interest increased by about $2.4 billion, with the largest daily increase occurring toward the upper end of the price range, suggesting new positions were being added as prices rose.
Over the past six months, changes in Managed Money gross longs have remained negatively correlated with the dollar, reinforcing the connection between recent dollar weakness and renewed speculative demand. The options market showed similar behavior, with increased call buying pushing three-month implied volatility higher while the 25-delta put-call skew became less expensive.
Continues here
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