Tags: gold | silver | oversold | price

Checking in on the Metals

Tuesday, 09 Jul 2013 07:43 AM

By Rick Pendergraft

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Precious metals have been in one of the worst slumps in the last 20 years or so. Prices have dropped sharply for both gold and silver.

Since the October high, gold prices have declined over 33 percent to their recent low. Silver prices have fallen even further, with a decline of almost 50 percent from the October high to the recent low.

Gold prices have declined in eight of the last nine months, the first time this has happened since the 1996-97 timeframe. The price of silver has fallen for five straight months, for the first time since 2000.

Based on the 10-month relative strength index, gold is the most oversold it has been since 1999. Based on the same criteria, silver is the most oversold it has been since 2001.

Along with the selling comes an increase in pessimism, or in the case of these two precious metals, less optimism.

Large speculators were net long 34,152 contracts as of last Friday’s Commitment of Traders report. This is the smallest position by this group in over 10 years — perhaps even longer, I just happen to be able to back through 10 years of records.

For silver, large speculators are net long a meager 837 contracts. By far the least bullish the group has been in the last 10 years.

It might not happen this week or this month, but there is going to come a time when these two metals are going to reverse the downtrend and when they do, it will likely be a violent upward move.

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