WEEKLY COMMENTARY

February 1, 2005
By Theodore Butler


The latest Commitment of Traders Report (COT) indicated a continued improvement in the market structure for gold and silver. This is the third consecutive weekly improvement in the COTs since the bottom in early January. In gold, the dealers have reduced their net short position in COMEX futures by over 112,000 contracts (11.2 million ounces) and by almost 40,000 contracts in silver (200 million ounces). These are among the largest clean-outs in history, and set the stage for powerful rallies ahead.

My personal take on the COTs is still that the bottom is effectively in, and we are at an ultra-low risk buy point. If I am wrong and we do take out the January lows by a decent margin, it will only come with heavy tech fund new short selling. This can only make the market structure even stronger as there is no way the tech funds would then not be required to buy back their shorts at a loss. This is a time to be aggressively invested.