Silver. Another Spike Coming?

Summary & Conclusion

Technically, silver has been consolidating relative to gold, commodities and the HUI - but remains in a Bull trend relative to all of them. With 85% of world mine output having been hedged roughly a year ahead (and with current prices thereby locked in to support coming year's cash flow) mines could be accused of speculating if they sold any more forward contracts. Indeed, the evidence is that they are pulling back from such activity (% of total shorts is falling), and this has been accompanied by a spike in lease rates.

Only "bearish" sign is rise in % of small speculators who are typically on the wrong side of the market.

On completion of current consolidation phase relative to Gold, Commodities and the more speculative Gold/Silver shares, silver looks like it has the potential to continue its relative bull run. i.e. We might very well see another upward spike in Silver.

One snippet coming out of the Berkshire Hathaway AGM was that the company has divested its silver. There has been some market conjecture that this may have been a source of supply for the ETF. From one perspective, this takes a significant potential supply overhang out of play.

RS Silver:Gold chart looks like silver has been consolidating

RS Silver:CRB looks like it is straining. Double top? Unlikely. Vertical count calls for significant further upside.

Silver lease rates are spiking

Silver broke out relative to $HUI and also seems to be consolidating

Industry hedgers (Commercials) down from 72% 6 weeks ago.

Large Speculators (Longs) down from 48% 6 weeks ago
Small Speculators (Longs) up from 26% 6 weeks ago

Total of 108,000 contracts outstanding = 540 million ounces

This amount represents 84% of world-wide mine production in 2004.