Open interest in the March silver futures contract experienced another sharp drop on Friday, adding to the substantial comedown seen on Thursday where it shed over 14,000 contracts. Friday witnessed a drawdown of a bit over 10,000 contracts bringing the remaining open interest in the March to 4,250 contracts. That is 21.25 million ounces of silver.
If there is going to be a short squeeze on the March, I would think that we should not see any further sharp reductions in that contract. If the specs keep bailing out at the present rate, any fireworks will have to wait until at least May unless of course someone wants to play the very thinly traded April contract. At this point I would have to say that the prospects of a squeeze in the nearby are diminishing.
In watching the spread between the March and the May, the market is currently out of backwardation by about 2 cents or so.
If the longs want the silver badly enough they will force the March to a premium back over the May contract.
We will just have to wait and see.
Even without this occuring, the price action in Silver is very impressive with it up nearly 3% at one point during the session. It continues knocking on the door of the $34 level and although it cannot seem to muster the energy yet to take that out, it is thus far not dipping very much either. I think that if the mining shares could show any significant display of strength, it would help silver run through $34 but so far nothing doing on that front.
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