Gold & Silver Price Short Term Outlook – 25th March 2013

Here is our weekly review of the positions of the large traders in gold and silver based on the weekly Commitment of Traders Report. It is the core of the short term price setting. Read our Crash Course In Short Term Gold & Silver Price Forecasting to gain insights in the basics, and the previous updates at the bottom of this article. The source of the information in this article: Standard Bank Research reports via Kitco.

The aim of this article is not necessarily to comment on reasons why the gold price did not react on events in Cyprus or Japan. Rather, the positions of the really big money in the market reveals their answers to those events!

Gold Outlook

The net speculative length (long minus short positions of speculators) remains at bullish levels. This picture has not changed in the last six weeks. We wrote past week, and repeat again this week, that this setup looks like it allows every moment for a potential rally.

gold_speculative_length_total_open_interest_25_march_2013

Silver Outlook

Contrary to gold, the picture in silver became extraordinary for two reasons. First, the net speculative length (long minus short positions of speculators) keeps on improving. The positions are now very close to extremes, like the ones in the summer of 2012 and the end of 2008. It should be noted that even in these circumstances, prices can still go lower … the big money simply has that power.

silver_speculative_length_total_open_interest_25_march_2013

Digging a bit deeper into these positions, it becomes clear that the speculative shorts stand at extremely high readings while the longs are somehow below average.  Combined with relatively low short positions held by commercials (see here), it paints a bullish picture from a contrarian point of view.

silver_speculative_positions_25_march_2013

Furthermore, the other noticeable fact, is that the physical silver holdings by the ETF’s stand at historic highs. Combine this with the silver price near its two year bottom, and the aforementioned futures positions, the total picture looks bullish.

silver_physical_holdings_25_march_2013

The drawback is the large open interest, which could result in additional selling pressure near term. It remains to be seen if lower prices would result in the continuation of the ongoing trend of accumulation in the physical market.

5-year average

Open interest in both metals keep on hovering at the same levels of the last couple of weeks. Silver, and to a lesser extent gold, have high readings compared to the 5-year average.

open_interest_25_march_2013

Follow the gold and silver price evolution week on week. Read the previous updates (courtesy K. Xeroudakis, precious metals strategist).

Gold & Silver Price Short Term Outlook  (March 18th)
Gold & Silver Price Short Term Outlook  (March 11th)
Gold & Silver Traders Positions on March 5th – Weekly Update
  (March 4th)
This One Chart Shows Gold Is Bullish  (February 25th)

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