COTS Data Shows Speculative Fever Not High in Gold or Silver


"Many traders are likely looking for gold to reach new record (nominal) highs prior to 'selling on the news'. . ."

Gold closed above the $1,000/oz level for a fourth session and is currently trading at $1,014/oz. During Thursday's trading it touched a new 18-month high of $1,023/oz. The gold open interest on the COMEX rose another 3764 contracts to 478,172, which is still a long way from the record 593,953 contracts seen in mid-January 2008. Indeed such open interest figures were seen for much of the final quarter of 2007 and the first half of 2008.

This contradicts those who claim that the gold market is in a speculative fever and would suggest that gold has further room to run prior to the much anticipated correction (by both the media and most gold analysts). Many traders are likely looking for gold to reach new record (nominal) highs prior to 'selling on the news' and taking profits. But some may look to buy on the breakout in anticipation of further gains. Recent resistance at the $970/oz to $980/oz mark will likely now become strong support, and with investment demand in China, Asia and the world remaining robust those expecting large falls to below the $950/oz level are likely to be disappointed.

Silver is currently trading at $17.17/oz and touched $17.63/oz over Thursday night. While silver is overbought by some technical measures, the important Commitment of Traders report shows that the silver open interest went up 155 contracts to 125,306. While this is a new recent high, silver's open interest high is around 150,000, some 25,000 contracts less than we are now. This too contradicts the bears who claim that speculative fever is too high based on the COT data. Silver at over $20/oz remains viable before the end of 2009.

Platinum Group Metals
Platinum was trading at $1,336/oz Friday morning while rhodium and palladium were trading at $1,650/oz and $302/oz, respectively.

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