The unprecedented default in the London Metals Exchange in nickel on March 8 by the largest concentrated short seller sent a wake-up call to the concentrated short sellers in COMEX gold and silver, resulting in them rushing to cover their short positions. The changes in commercial positioning on the COMEX have been so extreme since March 8 and particularly over the past few weeks, that, all things considered, the setup for an epic price rally has never been better in my opinion.
I’ve spent too much time and attention on the concentrated short position in COMEX silver (and gold) over the decades, not to be blown away by the largest COMEX commercial shorts in both gold and silver aggressively buying back shorts since the March 8 default in nickel. This is the prime motivation for the unusually aggressive short covering by the largest shorts.
The largest commercial shorts in both COMEX gold and silver have bought back and covered more short contracts than any time in recent years. What comes next after this short covering is completed? Does it make any sense for the largest COMEX commercial shorts to turn around and sell short aggressively on the next gold and silver rallies – only to put themselves back in the position they were in before the LME nickel short blew up? That outcome seems implausible considering how much time it took for the biggest silver and gold commercial shorts to reduce their dangerous short positions to the lowest level in years.
The best outcome for the big shorts in COMEX gold and silver would be to stand aside and refrain from aggressively adding new shorts on the next rally – possibly even buying in the initial stages of the next rally to whittle down their already-low short positions. Such a plausible and logical course of action would, necessarily, have profoundly bullish implications for price. The absence of new short selling will allow prices to behave as never before, rising faster and more sharply than ever seen.
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