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December 11, 2017 | Finally, Gold Speculators Start To Bail, Setting Up A Big Q1 2018

John is author or co-author of five books, including of The Money Bubble, The Collapse of the Dollar and How to Profit From It, Clean Money: Picking Winners in the Green-Tech Boom and How to Profit from the Coming Real Estate Bust. A former Wall Street analyst and featured columnist with TheStreet.com, he currently writes for CFA Magazine.

 

It took a lot longer than it should have, but gold futures traders have finally started behaving “normally.” The speculators who were extremely, stubbornly long – and who are usually wrong when they’re this excited — had maintained their over-optimistic bets when they should have been stampeding for the exits, making the last few months both boring and depressing for gold bugs and related investors.

This departure from the familiar script raised questions about whether the action in futures (aka paper gold) was still relevant in the age of Chinese physical gold exchanges and cryptocurrency. The jury’s still out on that one, but for now the numbers are reassuring.

The following table (courtesy of GoldSeek) shows speculators cutting way back on long bets and adding to short bets, while the “commercials” – who tend to be right at sharp turns — did the opposite, going a lot less short.

Same thing only more so in silver, where another week like the last one will bring net positions into balance for both groups, which has historically been extremely bullish.

Here’s the same data depicted graphically for gold: Note how both the speculators (silver columns) and the commercials (red columns) held their positions from spring into fall, producing the previously-mentioned boredom and depression. Also note the sharp drop in the most recent reporting week.

The numbers we’re seeing here are as of Tuesday the 5th, and the final three days of last week were a bloodbath for precious metals, so it’s highly likely that the next COT numbers – due out on Friday the 15th – will show absolute panic among speculators, leading to an even bigger swing in the right direction.

If history is still reliable, January will be a great month to own precious metals and mining stocks.

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December 11th, 2017

Posted In: Dollar Collapse.com

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