Originally published August 23rd, 2009.

There has been an ususual divergence between silver and gold over the past few weeks - gold's COT structure has improved while silver's has continued to deteriorate, against a background of a technical picture that looks considerably weaker than that for gold.

Unless silver's COT structure improves considerably in the near future and/or it breaks out above the important resistance around the $16 level, we will continue to view it as rangebound between the support and resistance shown on our 3-year chart following the break of the uptrend in force from last October.

While it can be argued that silver still has some catching up to do relative to gold following its devastating plunge last year, the fact remains that it has considerable resistance to overcome before it can break out to new highs, in marked contrast to gold, which has no resistance at all to overcome against many currencies, which is a reason why gold, and the better gold stocks, are generally preferred at this time.

The current increasingly bearish Silver COT picture is certainly a worry not just for silver bulls but also for gold bulls as well, and is a reason why, although we are now positioning ourselves for a gold breakout to new highs soon, we are open to the possibility that it may be preceded by a brief but violent shakeout which is why our long positions are protected by cheap Put options. Such a shakeout may be the "ambush" that we have suspected may take place for some time, which would enable the Big Money protagonists to achieve the double whammy of not only shaking the "little guy" out of his positions and mopping up his holdings, but covering their shorts and reversing positions ahead of "the big one".