A silver rebound could begin with funds buying back positions they previously sold short.
That possibility has become more relevant after the latest positioning shift.
The CFTC’s futures-only report shows Managed Money holding 16,886 long contracts and 9,272 shorts as of September 29. During the week, longs fell by 2,417 contracts while shorts increased by 3,278. The group’s net long fell almost 43%, from 13,309 to 7,614 contracts.
Funds had reduced bullish exposure and increased their reported shorts. That positioning change is consistent with selling pressure, although the report cannot establish how much of silver’s price weakness it caused.
It also changes how we would assess a recovery.
A trader closing a short futures position buys the contract back. Those purchases can support a rebound without requiring the trader to become bullish: taking profits or reducing risk can be enough. CME’s explanation of futures trading illustrates this buying mechanism.
Closing a bearish position and opening a bullish one both generate buying, but leave different exposure behind.
Suppose silver rallies and the next report shows fewer fund shorts, while longs remain broadly unchanged. That would be consistent with short covering contributing to the move.
If Managed Money subsequently rebuilds longs across several reports, it would show funds increasing exposure that benefits from further price gains.
For us, that distinction helps assess what could sustain a recovery. Buying from closing existing shorts has a finite pool of positions to unwind. Continued long accumulation would represent an additional source of participation.
Neither has happened merely because the latest net long is lower. Shorts can remain open, and longs can fall further.
In the next updates to our Gold & Silver COT Positioning Tracker, the useful question will be who is buying—and whether those purchases close old exposure or build new exposure.
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