Silver COT — Week of Sep 3 → Sep 9 (price: $41.725 → $41.341, –0.92%)

What the week really said

1. No one sold the breakout story. 

   1. Price dipped ~1% for the week, yet commercials lightened shorts and funds barely trimmed.

   2. If a top were in, you’d expect the opposite: commercials add, specs dump.

2. Shorts flinched. Small-spec shorts fell 14% (combined) and 13.6% (futures).

   1. When the smallest hands cover into a lull, they’re often the kindling for the next push.

3. Spreads surged. A +10.5% jump in futures spreading and +2.2% in combined says basis/carry desks re-engaged around the $40–42 zone.

   1. Translation: liquidity is organizing around higher prices—this often precedes faster trending.

4. Open Interest fell while price softened. 

   1. That’s not new shorts—it's position lightening.

   2. Supply of “paper silver” shrank a bit into the dip; when fresh longs arrive (post-COT), price has less resistance.

5. Post-COT confirmation: From the Tuesday close ($41.341) to now ($42.678) silver is +3.2%—exactly what you see when a market absorbs a wobble and then powers up.

Futures (cleanest read on outright direction & deliverable pressure)

Large Specs (funds/CTAs)

• Longs: 72,450, –2,016 w/w (–2.7%)

• Shorts: 18,513, –30 w/w (–0.2%)

• Net: +53,937, –1,986 (–3.6%)
  Read: Funds trimmed into the range—risk dialed back, not reversed. The cut was small, and shorts didn’t press.

Commercials (producers/swap dealers)

• Longs: 40,163, +42 w/w (+0.1%)

• Shorts: 113,565, –753 w/w (–0.7%)

• Net: –73,402, +795 less net-short (+1.1%)
  Read: Hedgers eased shorts on a down week—classic “not the top” tell. If they feared exhaustion, they’d add, not lift.

Small Specs (retail/prop)

• Longs: 32,191, –817 (–2.5%)

• Shorts: 12,726, –2,008 (–13.6%)

• Net: +19,465, +1,191 (+6.5%)
  Read: Retail covered into weakness. Shorts blinked first.

Spreads (calendar/basis)

• 11,899, +1,126 (+10.5%)
  Read: Basis traders came back hard—a 10% surge. Around breakouts this is gasoline for volatility.

Open Interest (Futures)

• 156,703, –1,665 (–1.1%)
  Read: Price ↓ with Open Interest ↓ = de-risking, not new short supply. Bullish texture.

Futures & Options Combined (best for total leverage & hedging flow)

Large Specs

• Longs: 68,616, –3,014 (–4.2%)

• Shorts: 17,727, –1,166 (–6.2%)

• Spreads: 37,560, +802 (+2.2%)
  Read: Same story: lighten-up, but more short covering than long cutting in percentage terms.

Commercials

• Longs: 48,007, –211 (–0.4%)

• Shorts: 119,378, –943 (–0.8%)
  Read: Commercial net short shrank again—hedges were reduced into a soft tape.

Small Specs

• Longs: 35,941, –1,289 (–3.5%)

• Shorts: 15,459, –2,404 (–13.5%)
  Read: Retail covered aggressively; skepticism fading.

Open Interest (Combined)

• 190,124, –3,712 (–1.9%)
  Read: Market de-levered a touch while holding the $41 handle—spring compressing.

Who moved what—and why

• Funds/CTAs: Trimmed gross longs –2.7% (futures), but didn’t chase shorts.

  • They’re waiting for the next trend signal (think: daily closes above $42.5–43).

• Commercials: Reduced net short ~1%; hedging into strength earlier is being rolled/managed rather than escalated.

  • That’s fuel for further upside if price keeps climbing.

• Retail/Small Specs: Big short covering (double-digits %) tells you late skeptics are capitulating.

  • That’s how breakouts sustain.

• Spreads: The +10% futures spread surge is the standout.

  • Around secular breakouts, spread books morph into directional as carry thins—this is how volatility expands.

Which cut matters more: Futures or F&O Combined?

• Use Futures when you care about outright directional risk and the deliverable dynamic (it’s the cleanest signal for squeeze/hedge pressure).

• Use Combined to see the true leverage footprint (options hedges & delta exposure can hide shifts if you only look at futures).

  
  This week: the message is consistent across both—de-risking without distribution, more short covering than new shorting, spreads surging. That’s bullish texture.

Why price popped after the report

• You had Open Interest down, commercials less short, small specs covering, spreads re-igniting—a market that cleared out just enough inventory.

• Post-COT, as spot pushed back through $42, CTAs add and ETF demand bleeds in; with fewer shorts and lighter OI, the tape travels farther, faster.

The punchline

This wasn’t a “top.” It was a breath.

• Funds eased the throttle; commercials eased the hedge; retail shorts backed off; spreaders hit the gas.

• Price then re-accelerated towards $43—right on cue.

Actionable tells this week:

• Futures OI: up with price = fresh trend fuel.

• Large-spec longs: watch for +3–6k adds;

• Commercial shorts: another modest lift or flat = constructive.

• Spreads: if they keep rising, expect bigger daily ranges; if they roll off while price rips, that’s spread → directional migration—often the launch phase.

Bottom line: Structure stayed bullish, and the tape confirmed it.

Collateral on Edge, Real Money in Ascent

Liquidity plumbing is flashing strain: reverse repos drained to a fresh low ($17.3B) while SOFR (overnight) funding remains pinned at 4.41% with daily volumes over $2.8T, a paycheck-to-paycheck market.

Swap spreads at –25bps show dealers prefer synthetic exposure because real Treasuries aren’t flowing—collateral scarcity is deepening.

The long end refuses to behave: UST–JGB spreads are slipping under 2.5%, Japan’s 30Y is at 3.21%, and the US 30Y is stuck at 4.68%—duration stress is global, not local.

Safe-haven demand is live, with USD/CHF breaking below 0.80, while carry trades hover in the danger band.

Silver’s borrow rate is spiking at 1.54% with just 800k SLV shares left—collateral chain stress is bleeding into real assets.

Gold’s open interest is climbing even as registered stocks stay wafer-thin at 21.3M oz—a structural bid undergirds the tape.

Put together, the message is clear: the system runs on thinner collateral, higher rollover stress, and rising term premia. Gold anchors trust; silver is the lever—and both are just getting started.

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Luke Lovett
Cell: 704.497.7324
Undervalued Assets | Sovereign Signal
Email: [email protected]

Disclaimer:
This content is for educational purposes only—not financial, legal, tax, or investment advice. I’m not a licensed advisor, and nothing herein should be relied upon to make investment decisions. Markets change fast. While accuracy is the goal, no guarantees are made. Past performance ≠ future results. Some insights paraphrase third-party experts for commentary—without endorsement or affiliation. Always do your own research and consult a licensed professional before investing. I do not sell metals, process transactions, or hold funds. All orders go directly through licensed dealers.