Loading ...Smart Money ready to bet on gold?
Consider the Hedgers’ [smart money] MAXIMUM net short positioning in gold futures which occurred in December 2009—-21 months – and another 50% gold rally – before prices topped.
How is that relevant for gold? As of this week, Commercial Hedgers are holding the LOWEST net short position in gold futures since the launch of the gold bull market in 2001.
Does this mean that a reversal higher is imminent in gold? Not necessarily. The thing with COT analysis is that it is difficult to correctly determine when an “extreme” in Hedgers’ positioning will actually result in a price reversal. As is said regarding all sorts of market metrics, an extreme in COT positioning can always get more extreme. Plus, the COT positioning can peak well in advance of the turn. Consider the Hedgers’ maximum net short positioning in gold futures which occurred in December 2009, 21 months – and another 50% gold rally – before prices topped.
Thus, it is tough to time trades with accuracy based on the COT report. However, one thing we can say in the gold bugs’ favor: what had mostly been a headwind for gold for the past decade or so is no longer the case. While it may not make an immediate impact, the “smart money” Commercial Hedgers are now more aligned with them than at any point since the bull market began in 2001.
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