Buying Silver After a Price Crash – 22 April 2013

Silver has been the worst performing commodity of 2013…

IN JUST the past month, silver is down 20%… and it’s the worst-performing commodity of 2013, writes Brett Eversole for Steve Sjuggerud’s Daily Wealth.

Gold prices got most of the headlines last week… Gold fell $213 in two days. That’s good for a 14% loss. But silver was the real loser…

Silver dropped an enormous 18% in two days (it fell 13% on Monday alone). Silver and silver-stock investors took a beating. Not many people are interested in touching silver today. And that has me interested…

You see, history shows that we want to buy assets no one is interested in. We want to own what investors hate.

When it comes to silver, we have an easy way to look at investors’ interest – or disinterest – in the metal. It’s called the Commitment of Traders (COT) report… Longtime DailyWealth readers will know about this one.

The COT report shows what real traders are betting right now. When traders are extremely bullish or extremely bearish, they serve as an excellent “contrarian” indicator. In other words, you want to bet in the opposite direction. Take a look…

The black line shows silver prices. The blue line shows the net bets (long bets minus short bets) of silver futures traders.

When the blue line is low, traders are betting against silver. The contrarian trade is to buy.

Based on history, buying at these kind of extremes can lead to big gains…

The average three-month return when you buy silver at this extreme is 23%. That’s crazy.

I want some time to pass after the big move in silver. We could still see price “aftershocks.” I don’t want to buy silver until those pass.

But we’re going to have a great chance to buy silver very soon. Our clue will be when the COT numbers start to tick higher.

Steve Sjuggerud, 22 Apr ’13

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About abwehra group

The Art&Science of Trading Gold
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