Silver, one of the most volatile assets in the world, has just started to climb off the back of its worst readings in four years as the traders and hedge funds start returning to the market.
Over the last year, silver has seen massive price swings, including an 81% rally and two 30% drops which forced many traders to liquidate their silver holdings in order to meet emergency short-term requirements.
However, based on previous long-term performances after equivalent low periods, where returns reached as high as 405%, the time to invest is now. Especially as Asian economies such as India and China, where precious metals are highly prized, are starting to rapidly expand and strengthen.
Jason Goepfert created SentimenTrader, a service that tracks investor sentiment toward various asset classes. According to Jason, silver just bounced off its most pessimistic reading in four years.
The so-called "commitment of non-commercial traders" hit 10,352. That's incredibly low. The last time sentiment numbers were that low was in August 2007. Six months later, the price of silver was 59% higher. It rose from $12 per ounce to $19 per ounce.
I went all the way back to 2002 and found that silver sentiment bottomed near 10,000 six times... On average, the price of silver rose 33% in the next six months and 54% over the next year. This chart shows the last four times it bottomed...
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