Silver - Not a short-term buy based on COT, June 27th 2005

The positive fundamentals for silver haven't changed. In the mid to long-term there is actually one more reason to be bullish on silver: the increased 'rumors' about a possible silver ETF. Silver has also held nicely above the long term up trend and should find support in the $6.80 area. However, from a COT point of view silver looks vulnerable in the short term.

Commercial short and net short positions are again at comparatively high levels. Today's levels have preceded short-term price declines in the past three and a half years. 

The COT numbers have worked quite well as an indicator for short-term silver trading the past few years. There might and will probably be a day in the not too distant future when the old pattern doesn't repeat itself. For the time being I think however that a silver trader should seriously take the COT numbers into consideration. 

It is sad that Comex futures trading basically sets the silver price, but then again, without this systematic price manipulation I believe prices would be at completely different levels and this great long-term investment opportunity in silver wouldn't exist. Even if we once again get a little few dime plunge in silver I believe that in a few years it will be hard to sport on a 7-year chart. I also believe that when silver finally breaks up there won't be much time to get on board. So make sure you know whether you are a trader or investor and why you are in silver. And if you are not, a few hours studying the subject might be your ‘best investment’ this year.

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