Significant commercial short covering in gold, silver and copper, May 20th 2005

I have been quite bullish on silver (even short term) the past few weeks. Silver has held it's long term up trend line and had a comparatively favorable COT structure. The concern has been a comparatively high commercial short position in gold. Today's COT numbers confirmed that that has changed and significant commercial short covering has taken place in gold.

Similarly we have seen significant short covering in silver, even though some traders might have been transferred between categories as discussed briefly two weeks ago.

If the COT numbers are comparable and if the past 20 months is any indicator for the future, silver is a buy at these levels, based on COT.

We also had the almost inevitable 'little drop' in copper, which was accompanied by significant short covering by the commercials. 

Again, if you take COT as your leading indicator copper is a buy. Simultaneously the market is (very) oversold. 

The PM market is set for an upside swing based on COT. It's held back by the temporary dollar strength at the moment. 

This dollar rally may last for days, weeks, or a few months but that's it, IMO. After that be prepared for (significantly) higher PM prices. 

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