Following is a weekly chart of the Goldman Sachs Commodity Index or GSCI. Notice the large red line moving from left to lower right. That indicates the general overall trend of the sector which as you can clearly see has not been bullish.
What you are seeing here in graphic form is the result of money flows OUT of the sector by large speculative forces. That money is of course flowing IN to equities.
I am not sure what it will take for this trend to reverse but until it does, upside rallies in silver are going to be difficult to sustain.
One thing you might also notice is that there seems to be a decent base of support between 575-550 on this chart. My take on this is that while the overall complex is moving lower in price, certain sectors within it seem to be near values that would indicate that there is not a lot of additional downside left. Determining exactly what those sectors are takes a great deal of fundamental research and well as comparing chart action to those findings.
What this means is that while we are a long way from seeing sharp upside rallies and SUSTAINED uptrends in the complex as a whole, certain individual markets may merely grind sideways to slightly lower for the foreseeable future until something happens to arrest this general development.
For investors with a longer term time frame (notice, I am not saying 'traders'), we might be nearing the cost of production in some commodities meaning that your downside is limited.
I would also add a caveat here; if that base at 550 were to give way for any reason, look out, because the deflationary forces would be reasserting themselves. If that were to occur, and I would be very surprised if it did, expect for the bond market to reverse course and for rates to start dropping once again.
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