5 Signs Of An Imminent Gold & Silver Price Rally
Gold Silver Worlds
May 29, 2013
While the markets have been very volatile lately, hence difficult to predict, it is reasonable to expect a bounce in the price of gold and silver. We hasten to say that nobody can predict the future, so our expectation could turn out to be wrong. To be more precise, the probability of higher prices is higher than the probability of lower prices, at least in the short run. Here is why.
(1) Excessive speculative shorts and growing commercial longs
In the short run, gold and silver prices are primarily dominated by the futures market (COMEX) as reported in the weekly COT reports. The futures positions of commercials are increasingly long while the speculators are historically short. The first chart below shows those positions. It appears that the short positions of small speculators (small and private investors) are as high as in the years prior to 2000 (just before the current huge bull market started). The divergence between the commercial long and speculative short positions is considerable. Ted Butler repeatedly reports the influence of commercials in driving the price, so the likeability of a rally is high. However, there is one caveat. No matter how well a contrarian position can work, the speculative short positions are so high that it could break whichever rule has worked in the past. Chart courtesy: Sentimentrader and Standard Bank Research.