Daily Market Update 2/15/11

SILVER

Silver closed at $30.71, up $0.18 for the day in active trading.

Today’s silver increase was helped by the release of U.S. Commodity Futures Trading Commission data which showed last week there was a substantial increase in demand on the NYMEX. Silver should reach its recent high of $31.22 shortly, which should act as a short term resistance level.

Very tight physical silver supplies in the U.S. and China have tipped the U.S. silver futures market into backwardation since last week, making near-term prices more expensive than more distant months.

Backwardation, simplified, is when front month prices for a commodity go higher than those further out, reversing what is usually the case (contago), implying people/clients/whoever fear a near term shortage of that commodity. Backwardation is a very bullish sign that an explosive price break out is nearby. Normally, the longer the backwardation exists the better it is for the price to continue higher.

GOLD

Gold, fueled by a U.K. consumer price inflation report that was double the Bank of England target rate helped gold close at a four week high of $1,374, up $9 on the day.

John Paulson continues to be bullish on gold, currently his investment company, Paulson & Company, leads many other well respected financial institutions with 30 Million shares ($4.1 Billion worth) of the Gold ETF, SPDR Gold Trust. (See chart below)  

Additionally, overnight reports said renowned investor George Soros had increased his holdings in the SPDR Gold Trust during the fourth quarter of 2010. Other "heavy hitters" in the investment world also were holding onto their long-gold positions.