Based on Commitment of Traders (COT) data John Rubino at Dollar Collapse prefers silver over gold.
The gold COT chart (GC) shows large speculators are net long 178,718 contracts while the commercial traders are short 199,796. Short specs are long 20,808 contracts, making up the difference.
Data is is reported on Friday for the prior Tuesday.
Large speculators are typically hedge funds and small speculators are individual traders or tiny funds trading a small number of contracts. The commercials are the producers of gold plus the market makers who take the other side of trades.
Silver COT Chart
The silver COT chart (SI) shows large speculators are net short 1,508 contracts while the commercial traders are net short 14,463. Short specs are long 15,971 contracts, making up the difference.
On that basis, John Rubino says Silver Looks Way Better Than Gold Right Now.
Normally the action in the gold and silver futures markets tends to be pretty similar, since the same general forces affect both precious metals. When inflation or some other source of anxiety is ascendant, both metals rise, and vice versa.
But lately – perhaps in a sign of how confused the world is becoming – gold and silver traders have diverged. Taking gold first, the speculators – who tend to be wrong at major inflection points – remain extremely bullish. Commercial traders, meanwhile – who tend to be right when speculators are wrong – are extremely bearish, with short positions more than double their longs. Historically that’s been a setup for a big drop in gold’s price.
But now check out silver. Where gold futures speculators’ long positions are three times their short bets, silver speculators are actually more short than long. In other words, the people who are usually wrong are bearish. The commercials, meanwhile, are almost in balance, which is usually bullish for silver’s subsequent action.
What does this mean? One possible explanation is that silver has gotten too cheap relative to gold and needs to be revalued. That could happen in several ways, with both metals rising but silver rising more, or both falling but silver falling less. Or with gold dropping while silver rises, as improbable as that seems.
As the chart below illustrates, gold has recently been rising relative to silver (or silver has been falling relative to gold) with the gold/silver ratio now close to 80, meaning that it takes 80 ounces of silver to buy one ounce of gold. It’s been there two other times in the past decade and both times gold subsequently rose while silver rose a lot more.
