COT Report suggests silver prices may have bottomed

In recent weeks, Paul Carter posted two technical analyses, $46 Silver on its Way? and Another technical bullion indicator for silver?, both of which suggest silver may be making or has made an intermediate bottom.  Now, Gene Arensberg of Got Gold Report provides still more evidence that silver may be putting in a bottom.

Gene’s work centers on the COT (Commitment of Traders) Report, which is released weekly on Fridays by the Commodities Futures Trading Commission (CFTC).  The report discloses the positions of the various categories of speculators and hedgers that have positions in silver and gold.  Of primary interest to analysts are the positions held by the Large Commercial houses.

Eerily, astute analyses of COT Reports in the past often have accurately revealed the immediate future direction of silver and gold.  A short explanation of COT analysis says that the Large Commercials are the best informed, best connected traders in markets and that their positions can indicate future price action.  When the LCs are heavily short, look for downside action; when the LCs drastically reduce their short positions (The LCs are always short some contracts.), look for upside price movements.

In his latest Got Gold Report, Gene writes:

“Since February 28 of this year, as measured on COT Tuesdays, silver has corrected $8.73 or 23.7% from $36.89 to $28.16. As it did the Big Hedgers have reduced their combined collective commercial net short positioning by a huge 29,371 contracts or 66% from 44,593 to just 15,222 contracts net short. (From 223 million ounces net “hedged” down to 76.1 million ounces. … As measured by the Legacy COT, the lowest amount of silver metal net “hedged” by the commercials in the last 11 years was 70.6 million ounces on December 27, 2011, only about 6 million ounces less than Tuesday’s COT report.)

“The COMEX commercial traders do not have a large net short position for silver futures. In fact, the LCNS [Large Commercials Net Short position] is near decade lows, so the combined commercial traders are NOT positioning as though they believe silver is heading harshly lower with $28 handle silver.”

Gene sees the LCs positioned similarly in the gold market.  Here is a link to Gene’s video analysis of the COT Report as it pertains to silver and gold:  Got Gold Report May 28, 2012.

Got Gold Report also covers mining stocks, primarily the junior mining companies for investors who like to take aggressive speculative positions.  While we at CMIGS watch the mining companies with interest, we do not deal in them or make recommendations.  Gene publishes Got Gold Report semi-weekly with “flashes” on an irregular basis.  The cost is $200 annually.  Go the www.GotGoldReport.com for more information.