During the past three months the US Mint has reported sales of over five million Silver Eagles, the most, in my memory, of any three-month period in the seventeen-year history of the program. What makes these sales different is that the Mint has been buying silver on the open market, having depleted U.S. Government holdings for the first time in the country's history. It's hard to imagine a more bullish situation.
Confirming the strong retail silver demand is the position of the small trader in COMEX silver futures. Even after a 10% decline in price, the little guy is holding the largest net and gross long position in almost seven years. In the latest Commitment of Traders Report (COT), the small trader has become the largest long category, with a bigger long position (around 33,000 contracts or 165 million ounces) than the large speculator and commercial category. That's more than all the visible silver bullion inventory in the world, a situation that has never existed in any other commodity. It is incredible and unprecedented that the small trader is hanging so tough on the long side of silver. Unlike the mechanical, technical funds, who buy and sell purely on price signals, the small trader is looking at something else. My guess? He's looking at the real situation in silver on a supply/demand basis. The little guy has done his homework and is very well informed. In this case, I think the little guy is the smart money.
In my opinion, this strong retail demand and large futures position of the little guy just might bust the silver manipulation wide open. It is so much better that it is the little guy, rather than the big guys, doing the big buying. That's because the little guys are like an army of ants. They may swamp the big manipulative shorts. If a big long trader tried to muscle the market, he would be quickly put in his place by the authorities. But how do the authorities try to force the little guy out, especially after the CFTC wrote that anyone was free to buy and take delivery of COMEX silver if they thought the price was too cheap? These small traders are acting independently, after having done their homework. As a result of their study and conviction, the little guys are about to get a very good grade on that homework. Better than A+.
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