Silver Surges 5% as CTAs Cover Shorts in Dovish Market

Silver futures rallied by 5% as the Commodity Trading Advisors (CTAs) took cover on their shorts. The precious metal's price surged to $64.38, up $3.00 from the previous day. Goldman Sachs notes that positioning was light into the turn, making the market vulnerable to a sharp move once the macro backdrop improved.

The improvement in the macro backdrop came with an incrementally dovish FOMC meeting, intervention in the Japanese yen, and a reversal in oil prices, which weakened the dollar and lifted metals. Between July 28 and August 5, the DXY fell 1.7%, while COMEX silver gained 8.3%.

Goldman believes that Managed Money gross longs were an important driver of the silver move, with Aggregate silver open interest increasing by about $2.4 billion. The options market also showed similar behavior, with increased call buying pushing three-month implied volatility higher.