This chart is a major warning sign for silver prices

From Justin Brill, Editor, Stansberry Digest:

Traders are “all-in” on silver…

Regular Digest readers know our colleagues Steve Sjuggerud and Brett Eversole like to follow the weekly Commitments of Traders (“COT”) reports published by the U.S. Commodity Futures Trading Commission.

In simple terms, these reports show what traders are doing with their money in a wide range of markets. And they can be a useful measure of market sentiment. When traders are all making the same bet – when they’re all super-bullish or super-bearish – it’s a sign that the trade is “crowded,” and a reversal is likely.

As we’ve discussed in recent Digests, Steve and Brett have used these COT extremes to predict the rally in Treasury bonds and the decline in crude oil this year.

In the latest issue of their True Wealth Systems Review of Market Extremes, they highlighted a similar extreme in an unexpected market: silver. From the issue…

Precious metals are booming, once again, in 2017. Gold is up double digits and silver is up almost 15%. But silver could be getting ahead of itself…

Futures bets on higher silver prices are at an all-time high based on the COT report. This is a warning sign precious metals investors should pay attention to.

Today, futures traders are all betting on higher silver prices. Take a look…

As you can see in the chart, the only other time futures traders were this bullish on silver was August 2016

And silver went on to decline 24% over the next four months. While they don’t expect another 20%-plus decline today, they believe investors should be prepared for a double-digit correction…

Futures bets on higher silver prices are at an all-time high. As a contrarian, this is not what we want to see. I will be more interested when the script is flipped and futures traders are all making bearish bets on silver.

We aren’t recommending to short silver today. But if you own the metal it might be time to take your gains off the table.

Again, Steve and Brett don’t recommend shorting silver… and this is NOT a reason to sell all of your long-term holdings of physical metals.

But if you’re holding significant speculative positions in silver or silver stocks, consider taking some profits or tightening your stop losses. At the very least, consider holding off on making new purchases until traders become less bullish.

We also note that futures traders aren’t nearly as excited about gold. Bullish gold bets remain well below last summer’s extreme… so gold prices may hold up better than silver over the coming weeks.

But remember, gold has a challenge of its own: It’s testing important long-term resistance. And gold and silver rarely move in opposite directions for long. Don’t be surprised if the gold rally takes a breather, too.

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