Speculators crowded into long positions as inventories fell fast. When leverage met higher margins, silver reversed sharply.

Silver dropped from a record high of $121.64 to about $81.65, a 33% fall in a short time.

The decline followed weeks of heavy speculation, falling exchange inventories, and rising leverage across the futures market. These conditions left prices exposed once pressure appeared.

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The COT Signal That Warns First

The clearest early warning for silver reversals comes from the CFTC Commitments of Traders report.

The key section is managed money, which tracks hedge funds and other short term traders. These traders use leverage and tend to move in groups.

In week 5 of 2026, managed money held a net long position of about 7,294 contracts.

That was a stretched level compared with recent months. When too many traders hold the same bet, the market becomes fragile. 

Small changes in price or risk rules can trigger fast selling. Silver has a long history of sharp reversals after these crowded long positions form.

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Why This Indicator Signals A Reversal

The positioning signal lined up with stress in physical supply. In early January, COMEX registered silver inventories fell by about 33.45 million ounces, roughly 26% of the total available for delivery. 

At the same time, open interest rose to around 156,637 contracts, showing that leverage kept building.

Prices soon reached $121.64. As volatility increased, the exchange raised margin requirements.

Many traders had to reduce exposure quickly. Selling accelerated, and silver slid to about $81.65. 

The reversal followed the same pattern seen in past cycles, where extreme positioning breaks once risk tightens.

What To Watch Now

Weekly changes in managed money positions show whether selling pressure continues. 

COMEX registered stocks reveal supply stress or relief while open interest shows if leverage is increasing or leaving the market.

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Conclusion

Silver’s sharp reversal followed clear signals. Crowded speculative longs, falling inventories, and high leverage created unstable conditions.

The COT managed money data flagged the risk before prices turned lower.

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