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Silver market update, 29.12.2004

As predicted in the October article we got the COT triggered sell-off in silver. The second up-trend line has given silver good support and at the moment seems to hold even though silver has dropped 23 cents today to $6,77 (while gold has dropped 8,60 to 435,50). (Chart courtesy of StockCharts.com)

The change in COT structure has been even more dramatic with non-commercial long positions falling 37% from 75227 to 47582 contracts in one week between Dec. 7th and 14th. The commercial long/short ratio is also below 4 for the first time since September. 

During 2004 a below 4 commercial long/short level provided good buying opportunities. Non-commercial long positions reaching levels of over 65.000 contracts preceded sell-offs.

The fundamentals for silver has not changed and in the long term there is no other way than up for silver, IMO. The current COT-structure and TA suggest that we have a comparatively low risk entry point for silver investment, even though it is not yet clear if this move to the downside is completely over. Still, as in September, the silver market seems to be more dimes to the downside and dollars to the upside.

Earlier articles about silver:

Sources:

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