Loading ...Given this generally brutal price action in gold, then, we would observe that the flip to a net short stance by CoT large speculators is perhaps quite a bit behind the curve, if not at all “undeserved” — so we can follow the logic by which analysts are pointing to this rare bearish positioning as a “final capitulation” of sorts to mark the bottom of the gold decline. Simultaneously, the cluster of extremes generated by GLD’s sell-off — such as the RMI low, massive outflows, and extended monthly losing streak — would seem to suggest to seasoned market watchers that the battered and bruised metal might reasonably be due for a bounce, even if only of the “dead-cat” variety.
That said, the fact that we’ve already seen a number of headlines touting the net short CoT positioning as a valuable bullish signal for gold is reason enough for contrarian investors to proceed with caution before going long on bullion. And then there’s seasonality to consider; Schaeffer’s Senior Quantitative Analyst Rocky White notes that gold averages a loss of 2.07% during the month of September, looking back to 2010, with the median return arriving at a 2.43% drop (with only 37.5% of returns positive).