“wildly bullish” signal – best since May 2019
There are some analysts that think the only thing you need to look at to know where the price of gold and silver are going is the weekly Commitment of Traders report that presents all the positions of the big players on COMEX futures. It just got wildly bullish…
The big players are the Commercials which include the big bullion banks often blamed for the manipulation of the price through their massive short positions, and the Managed Money which includes the speculative investment funds. Part of the Commercial short position is miners hedging their production. That is, they are selling now in futures (going ‘short’) to lock in prices now as they close out when they sell the real metal later. As they get more confident with price rises they are less likely to hedge if happy to speculate.
In gold, that commercial short position fell 2.13m oz for the week and in silver it dropped 29.7m oz. So in other words the so called ‘smart money’, and some would argue controllers of the market, have drastically reduced their shorts meaning they are more bullish.
How bullish? The positions you can see in the charts below are the lowest short position level for the Commercials since JP Morgan reportedly got out of its famous massive short position in May 2019.
As you can see in these charts, there is a near 100% correlation between the Commercials short positions bottoming and a subsequent rally. The only question remains is whether they have finished yet. To put that May 2019 previous low into perspective, check out what happened in gold almost immediately afterward and only interrupted by the liquidity event with COVID just as we’ve seen with the Fed’s ‘Policy Mistake’ sharemarket crash currently playing out.
Veteran COMEX analyst Ed Steer describes this latest data (which for context closes at last Tuesday so is always 3 days old when the report comes out) - “The set-up for a big rally in silver is now back into the wildly bullish category based on its current configuration in the COMEX futures market -- and that's despite the punk price action we've seen since the Tuesday cut-off.” and “We're even more 'locked an loaded' in gold than we were this time last week”
This of course has all the fundamentals sitting behind it of central banks tightening monetary policy, fighting out-of-control inflation, but into a rapidly weakening economy heading to recession. Say hello to stagflation and hello to 1970’s redux.