Silver Sentiment Reaches Extreme Levels

We know that Gold sentiment is at bull market lows, and this should help contain any fall ahead for gold.  Looking at Silver this week also finally shows that sentiment has also finally fallen to bull market lows.
We know that when sentiment reaches these levels of extremes (see Green lines on below chart), that it has always marked a significant low.  As Silver has retraced back to its 2 year support area (low $26 area), sentiment has dropped even further this time compared to past lows.  This follows the general theme I outlined within the introduction of the premium newsletter.  The longer this bear market powers on, the deeper the sentiment will drop and therefore fewer will be willing to buy into the idea that a new low is at hand.

Sentiment is so low that the premium on the Sprott Silver funds has essentially dropped to zero.  No premium for a fund that has always commanded at least 2% but on average around 5-6% and as much as 20%.  It has never gotten anywhere near these level before and it just highlights the “disgust and fear” aspect of this bear market in metals.

It’s no surprise to see Silver sentiment and premiums at such depths.  The Silver chart is just horrendous, look at the series of lower peaks and lower DCL’s.  It’s no wonder that the latest COT report shows speculative long positions are at such very low levels.

In closing, the entire precious metals sector looks to be bouncing off yet another punishing drop and Cycle Low.  Prudent investors will ask the question, what is different this time around.  To this I have no firm answer and it’s why we remain guarded and under–invested.
But we’re also again back down and bumping against 18 and 24 month lows.  There is major support down in this area, so the theory is that we’re going to once again bounce out of this area.  If we manage to power higher, there is a great chance that it will just never look back!.  But if we were to lose major support, that will send the sector into a more pronounced and deeper bear market.

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