The past few months have seen some unusual, maybe even unique, developments in the gold and silver futures markets, with gold becoming extremely bearish and silver almost ridiculously bullish.

Neither imbalance has amounted to much in terms of price action, so it’s not clear whether the most recent changes matter. Still, the action in both gold and silver futures remains unusual enough to bear watching.

Beginning with gold, large speculators have lately been hyper-bullish and commercials extremely bearish. Since the former tend to be wrong at the extremes and the latter right, that was disturbing for anyone who didn’t like the idea of gold tanking in the short term.

Gold did fall a bit lately, to the low $1,300s, and that seems to have been enough to cause futures players to start unwinding their extreme positions. Speculators cut their net long bets by about 30,000 contracts and commercials cut their net shorts by a similar amount, which in the scheme of things is a big change. Another few weeks like this and both speculators and commercials will be close to neutral, which is positive for gold’s price going forward.

But silver has been and remains the really interesting case. Speculators – who are almost never net-short – spent a few weeks in that state before briefly reverting to slightly net long. But last week they jumped back to net-short in a big way (the bottom row shows the change in each position).

Here’s the action presented in graphical form, with the gray bars representing large speculators. Note how in the previous couple of cycles (early and late 2017) the speculators’ net positions got close to zero but then bounced back quickly to the more normal net-long. But in the current cycle they’ve been net-short for most of the past two months.

This has flummoxed industry analysts and led to some 
silver-to-the-moon predictions which, based on the rising volatility in the broader financial markets, are at least plausible.