Goldman Sachs’ Robert Quinn has been tracking the deterioration in silver positioning for weeks, and his latest trading-desk analysis suggests the market may finally be approaching an interesting inflection point. Five consecutive weeks of speculative selling have driven net positioning toward the second percentile of its two-year range, with $2.6 billion of fresh shorts added during the liquidation. Yet silver has begun behaving differently. A post-election recovery in Chinese solar equities helped trigger a 6% rebound, downside option protection has become less expensive, and the metal managed to recover surprisingly quickly from another uncomfortable US inflation surprise. Quinn is not declaring an outright breakout, but the evidence suggests the balance between exhausted longs and newly vulnerable shorts may be changing. For a metal that has spent months punishing the bulls, that is worth paying attention to.
• Goldman finds speculative positioning approaching an unusually depressed historical extreme, but the composition of that selling tells a more interesting story.
• A sharp divergence between two important industrial-demand indicators may be changing the way investors approach silver.
• The options market has begun retreating from an extraordinary period of downside anxiety, although confirmation remains incomplete.
• Silver’s response to the latest inflation shock may prove more revealing than the initial rebound itself.