Silver: Anomaly In Open Interest [SPDR Gold Trust (ETF), iShares Silver Trust (ETF)]

silver demandGary Christenson: Each week the CFTC publishes data from futures and options contracts for many commodities. Open interest shows the number of open contracts – one long for each short – in a particular commodity, say silver.

Usually price direction is consistent with open interest trend.

See the 14 year graph of open interest and prices in the silver market. Prices are shown on a log scale with silver prices in black, while open interest (per CFTC) is shown on the left in red.

silver price vs  open interest 2001 2014 trading

Note the similarity in the trends for open interest and prices from January 2001 through the end of 2011.

To more clearly analyze these trends, use a moving average for price and open interest to smooth the graphs. Now graph price and open interest (below) from January 2001 to December 2011. Excel calculated the statistical correlation at +0.56.

silver price vs open interest 2001 2014 trading

Now graph price and open interest (below) from December 2011 through November 2014. It looks rather different. Excel calculated the statistical correlation at – 0.59. 

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