Friday, May 1, 2015
The weekly Commitment of Traders report shows non-commercial traders reducing their net-long position by over 10,000 contracts during the most recent reporting period ending on April 21st. During this long liquidation selling by commodity funds, commercial traders were covering short positions in nearly the same quantity as the commodity funds were selling. Small speculators remained net-long Silver, adding a scant 260 new net-long positions during this timeframe.
Most commodity markets were trading lower following the April Federal Open Market Committee meeting (FOMC), despite a lower U.S. Dollar, as some positive economic news out of the U.S. has once again raised concerns among traders that the Fed will indeed move to raise short-term interest rates sometime this year. The precious metals sector was among the hardest hit on Thursday, with Silver down over 4% and Gold and Platinum declining nearly 2.5 % as of this writing. Weekly jobless claims fell to 262,000 for the week ending April 25th, which is the lowest level seen in nearly 15 years! On top of the good news on the labor front, reports on Personal Income, Employment Cost Index and Chicago PMI also came in above analysts' expectations. Precious metals prices are particularly vulnerable to changes in interest rate expectations given storage costs for holding the metal as well as the lack of an income stream. With the 10-year Note yield shooting higher the past two sessions, the benefits of holding precious metals has waned considerably, and what we are seeing appears to be long-liquidation selling by weak precious metals bulls.
Looking at the weekly continuation chart for Silver, we note the market making a series of lower highs and lower lows since early 2012, following an unsuccessful attempt to trade above $50 per ounce in 2011. The market appears to be forming trading ranges for a moderate period of time prior to a gradual move lower to another price range. In 2015, Silver has spent the majority of its time trading between 15.000 and 18.500 and now appears poised to test the lower levels of the range. The next major support level is seen at the "spike" low made back in December of last year at 14.100, with resistance seen at the 2015 high of 18.445.
Mike Zarembski, Senior Commodity Analyst