Silver's Rare Net-Long Signal in 2018 Reveals Why COT Extremes Matter

In nearly two decades of working with Commitments of Traders data, a rare net-long commercial signal in silver emerged in 2018. This was unusual because commercials in silver are typically net short due to producers and other physical-market participants using futures and options to hedge business exposure.

The shift to a net-long Commercial position coincided with a major low in silver prices, which were trading around $14-$15 an ounce at the time. Mining costs averaged around $17 an ounce, which helped explain why hedging behavior had changed dramatically: at depressed prices, there was less incentive for producers to lock in future sales.

A similar Commercial net-long episode appeared around important lows in 2019 and 2022. These examples show why an extreme can become especially informative when it reflects a genuine change in how physical-market hedgers are behaving.

The current precious-metals complex, however, is sending a more cautious message. The COTbase combines positioning across gold, silver, copper, platinum, and palladium into a precious-metals complex, which is currently in bearish territory with a larger-than-average bearish extreme.