Silver’s rare net-long commercial signal shows why COT extremes can reveal what price alone misses

Silver’s 2018 net-long commercial position was an exceptional signal

In nearly two decades of working with Commitments of Traders data, one of the clearest precious-metals signals I have seen came from silver in 2018.

Commercials in silver are typically net short because producers and other physical-market participants use futures and options to hedge business exposure. In the full history I was reviewing, that made the 2018 shift to a net-long Commercial position highly unusual.

At the time, silver was trading around $14–$15 an ounce. My research then put average mining costs around $17 an ounce. That did not mean every producer faced the same economics, but it helped explain why hedging behaviour had changed so dramatically: at depressed prices, there was less incentive for producers to lock in future sales.

The positioning shift coincided with a major low. Similar Commercial net-long episodes also appeared around important lows in 2019 and 2022. These are historical examples rather than a mechanical rule, but they show why an extreme can become especially informative when it reflects a genuine change in how physical-market hedgers are behaving.

Gold confirmed the 2018 precious-metals message, but silver was the cleaner signal

Gold also showed a strong bullish COT setup around the 2018 low, but the historical context was different. Gold Commercials have been net long at other points in the available history, so the silver reading was more unusual.

That distinction matters. An extreme should always be judged relative to the normal behaviour of the market and the trader group being analysed. A net-long Commercial position is not inherently bullish in every contract; in silver, it stood out because Commercials are usually net short.

This is also why I prefer to use COT data as positioning context rather than as a generic ‘smart money’ label. Commercials are hedgers. Their positions can become valuable signals when their behaviour moves far outside the historical norm, but the reason for that positioning still matters.

The current precious-metals complex is sending a more cautious message

The historical silver examples are bullish case studies, but the current sector-wide picture is different.

COTbase combines positioning across gold, silver, copper, platinum and palladium into a precious-metals complex. That broader measure is currently in bearish territory, with a larger-than-average bearish extreme.

In my view, that deserves caution. It does not prove that gold or silver must reverse immediately, and it is not a precise timing signal. It does say that positioning across the group has become stretched enough that I would be careful about assuming recent strength can continue without interruption.

The sector view can be useful because an individual metal may look constructive while the wider complex is becoming crowded in the opposite direction. In previous episodes, bearish extremes in the complex have appeared around important tops, just as the 2018 bullish complex reading highlighted an unusually strong opportunity.

Copper’s all-time extreme reinforces the need for patience

Copper remains another important part of the current picture. It is still at an all-time COT extreme, a condition I highlighted in my previous review.

All-time extremes sound decisive, but they can remain in place for weeks or even months before price reacts. That is one of the most important practical lessons in COT analysis: historical significance is not the same thing as precise timing.

I therefore treat copper’s extreme as a major positioning condition rather than a short-term entry signal. The same principle applies to the precious-metals complex. Extremes tell us that positioning has moved into unusual territory; price action and time still determine how that pressure is resolved.

COT extremes are most useful when the market structure explains the signal

The 2018 silver example remains one of my favourite illustrations of what COT data can add. The signal was not powerful simply because a line reached an extreme. It was powerful because a historically unusual positioning change made sense in the context of the physical market.

That is the standard I try to apply today as well. The current precious-metals complex is bearish, copper is at an all-time extreme, and those conditions deserve attention without being turned into guaranteed forecasts.

The value of COT analysis is in showing where participant behaviour has become unusual before the price chart necessarily explains why. Used that way, it can add a layer of market structure that price alone cannot provide.