Haynes:  “(We are seeing) continued solid buying, and premiums remain strong.  90% (junk silver) is still in short supply.  The basic silver bullion products, 100 ounce bars, 10 ounce silver bars, and silver eagles, those are the silver buyers’ favorites.  Silver is hot, no doubt about it....

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That’s also evidenced by the gold/silver ratio dropping below 60/1.  It was in the high-60s for weeks, but it’s now broken below 60/1 -- showing that there is continued interest in silver over gold to a degree.” 

Eric King:  “Dan, what about the COT?  I understand there were some major changes there as well.”

Norcini:  “Yes.  Eric, we’ve been talking about this for some time, that we really have not seen a strong inflow of speculative money from the big hedge funds.  They’ve been pressing in the gold market from the short side.  They have never been net-short (gold), they’ve just been simply reducing their net-long exposure quite significantly as they have been building up their short positions.  They remain net-long, but at very low levels.

The COT had been showing there just wasn’t any strong speculative interest on the part of these big players to get into these precious metals markets -- not only gold but the same thing with silver.  They have been pressing silver.  There have been a lot of short positions established in the silver market as well.

Well, what we’ve seen in the COT is interesting because over the last six weeks when we look at the gold COT, that hedge fund category has covered a remarkable 20,000 short contracts.  They’ve lifted those short positions off, and in the process of doing that you have had strong buying by what we call the other ‘large reportables.’  Those are the guys we talked about last week that had such a big change in their composition (on the COT).

They (large reportables) have moved aggressively to the long side in the gold market, and their bet paid off big-time because they were obviously positioned quite well for the lift higher this week.  And really the hedge funds were caught holding the short end of the stick here because they had a large amount of short covering.

The point of this is that it looks like this week, between the short covering and the blast through overhead resistance on the charts, tells me that there has been a fresh influx of hedge fund money coming into this market.  The speculators are coming back in (to the gold market as well).  This is the one thing this market has been missing for a sustained move higher. 

I think we are seeing that sea-change in sentiment that we’ve been needing and it’s starting to lift these markets.  At the same time this is happening, generally as you move into the fourth quarter, that’s a strong period seasonally speaking for gold.  It tends to do well in the fourth quarter with the onset of those festival seasons in the Far-East. 

So the timing of this is very appropriate because as this money is coming in from the speculators, you are also going to see that strong, sustained demand on the physical side.  Right now the market is firing on all cylinders.  The same thing is true for silver.  You (also) had (large) short covering on the part of the hedge funds in silver.”

IMPORTANT - Norcini also spoke about other key developments in the silver market.  This was just a small portion of the type of critical information which is covered each week in the KWN Weekly Metals Wrap.  To hear a continuation of this conversation, you can listen to the entire interview by CLICKING HERE.

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Eric King

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