Gold Commitments of Traders

gold-hedge-funds

No wonder gold got clocked like it did!

Hedge funds were actually busy adding more longs and covering shorts over the past week’s reporting period. As soon as those downside support levels were taken out after the election results were digested, gold bulls were getting mauled in a big way.

gold-net-positions

As you can see, every single speculative category remains net long as of last Tuesday. A great number of those longs are either underwater or have already been liquidated.

I am more anxious to see this coming Friday’s report to be honest as that will contain the positioning changes AFTER the election; that is what will be most important. Suffice to it say that an awful lot of people bet on the wrong direction for a gold move and they are now paying the price.

Additionally, we had yet another drop in reported gold holdings in GLD this afternoon.

gld-etf

The last three trading days have seen GLD disgorging more than 30 tons of gold! Holdings are back at levels last seen in June of this year.

Based on what I can now see taking place in GLD, rallies in gold are going to be sold. Western-based investors are getting out and are moving into equities ahead of next year.

Since the metal has dropped so far, so quickly, I would not be surprised to see a bit of a bounce down here especially now that it has been able to hold initial support levels above $1200 but there are a myriad of gold negative fundamentals now in place. China and India can probably offer it some downside support but as far as any sort of sustained rallies go, there is nothing that I can see at this juncture which would lead me to believe that is likely, especially with the US Dollar moving the way it is.

By the way, those calling for hyperinflation and gold prices in the stratosphere as a result had best come up with a intelligent explanation as to why the US Dollar is going to fall apart in an environment in which the US is the only major Western industrialized nation where interest rates are rising and where growth prospects look the best.

I think one can easily make the case that if a Trump administration brings in with it a real stimulus program, such as the infrastructure plan I see being discussed, along with regulatory reform, US growth prospects are going to be looking rather good. That by itself could very well induce the Fed to move interest rates higher at a FASTER PACE than the market initially envisioned in order to nip off any nascent inflationary pressures. Such a development would bring even more support into the US Dollar.

By the way, as a sort of side note to this.. look at how quickly hedge funds have going from a net short position in copper to a net long one! And most of this took place AHEAD of the election results! Yikes!

copper-cot

7 thoughts on “Gold Commitments of Traders

  1. Dan,
    The case for gold is based on credit problems. Right now they are not visible, BUT they are there. Their is too much debt out there that will start coming due next year and build up year after year culminating in 2020- 21. Cheap borrowing costs have made corporations go out and borrow to pay dividends and buy back stock. not to grow their businesses. It has made corporate statements look good, and so the stocks still look profitable not making them truly profitable. The worst culprits are auto companies who have made sub prime loans to sell cars and oil companies to produce more oil which has done nothing but lower the price of oil to where they can’t pay off their debts. Watch the junk bond market. Under BBB is increasing every month and as defaults start to build, people will move back in to gold and silver.
    At least that is my reason to want to own gold and silver and especially the mining shares.
    Jim

    • jim;

      understood – the issue for traders however is more short term oriented as one cannot say with any degree of certainty WHEN such a thing will begin to impact gold. It could be next month or next year for all we know. That is why moving out too far ahead of where the market currently is can be tricky. right now, the fundamentals are stacked strongly against gold.
      You have been around long enough to know that the Street can ignore things far longer than most people can imagine.

      Look at how long it took for the investing world to become seriously concerned about issues related to Greek bonds during that crisis. The problems with greece did not suddenly appear overnight. They were lingering for years and then one day the markets suddenly became concerned about it.

      Waiting for something that might happen down the road means waiting for the crowd to come around to one’s way of thinking and that can be far longer than we might hope.

      I learned a long time ago to view the chart action in front of me and go with it until something changes on the chart that tells me something has changed in regards to sentiment.

      Gold’s problem at the moment is the GLD holdings are falling off.

      • Thanks Dan for the straight talk: THE gold pushers always create a lot of noise : I like a lot of foak have been influenced by there relentless gold and silver hawkers: SINCERELY: With your HELP I CAN STAY MORE FOCUS

      • Thanks Dan for the straight talk: THE gold pushers always create a lot of noise : I like a lot of foak have been influenced by there relentless gold and silver hawking: SINCERELY: With your HELP I CAN STAY MORE FOCUS

      • Dan,
        You are 100% correct. No question. I was just referring to what you said above as to any reason why anyone would want to own gold. Yesterday was a good one for most gold and silver stocks. As I have mentioned, GGN is a play on gold, basic metals, and oil and gas. Right now you can buy it in the low $5 range. They are paying a dividend of about 16% or $.07 a month. It will definitely be paid this month and next. By the end of this week they will determine if they will continue to pay the $.07 or change it up or down. The market is probably expecting a drop and the stock has been selling off. They will commit for the first 3 months of next year. I own the stock for under $4 so I have been earning 20% on my investment, and will continue to do so. Ordinarily, gold and silver don’t pay dividends, but this one does because they sell call options on their entire portfolio and pay out the premiums. By the way, back in the 1980s, Hecla and Homestake mining paid out 15% dividends, they were making so much money.
        You are a trader, and you have to obey your charts, and I can’t tell you how important your readings are to me. When you point out the problems (like GLD losing tons) I listen, and take out insurance with DUST and JDST and I sell calls against my positions. When you give the green light, I listen and cover my calls, (or buy back the stock) sell my DUST and buy NUGT. This has been a good year for me so far, and I’m looking forward to the next 3-5 years following your advice.
        Jim

  2. Hi Dan, hereby my thoughts,
    when checking the charts of the $USD index and $GOLD next to each other, then the recent strong down for gold is understandable. The $USD index is now at 100. This is for me a hard top, also because it was already three time NOT broken.
    Then putting the 10YR Treasury over it, then I want to assume that it will top at 2,19. All three movements are too steep. Especially the speed with which this happened, just within a few days, should make us suspicious. It is part of the Trump-effect, and should correct.
    Especially the 2.19% on the 10 YRs is high versus the inflation of 1.46% (30 sept). Next week the inflationdata of 31 october will be published. That will be an important figure. Based on that can be judged whether the bondmarket was correct or not. This number can confuse everything.
    Until now my opinion is that the higher real rates in both US and EU have more and more as fundamental the higher risks. The debts are too high compared to GDP’s and inflations. There is lots of free cash at the sidelines with the big investors/funds. The spreads on the bonds are still not very big, but it CAN go quickly. When they increase, we will know more.

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