We have very interesting developments in the Gold market recently. Do not lose the big picture with all daily noise. Here are just few dots for you to connect.
With all the games with naked shorting of Gold COMEX managed to break out to another record leverage and now we have 117 proud owners to every One Once of Gold. When the game of musical chairs will begin this time?
"Just like most of the products Americans buy are made in China, most of the economic problems the Chinese have are made in America," says investment guru and radio host Peter Schiff, CEO of Euro Pacific Capital. "The Chinese have decided to peg their currency to the dollar and so they have imported our monetary policy."
But as Schiff explained to Reason's Matt Welch, that may be changing. China's recent market woes may force China to change its monetary policy and Schiff believes the Chinese government is laying the groundwork to back its currency by gold.
"Quietly they have been increasing thier ownership of gold," says Schiff. "They want to untether their currency from the dollar but they don't want it to be backed by nothing."
Nobody loves Gold any more. We have headlines about gold going down to $800 or even $350. Even I myself find it almost embarrassing to write about gold any more. We must be making the real bottom now. Actually chart above is confirming it after my previous observation. We have retested the Low on daily and now on weekly we have the very nice potential reversal in the making. Read more.
Some Central Bankers in the world were popping champagne last week on the FED's Mission Accomplished and "the total meltdown of Gold". Some other Central Banks were just buying more of it. Who will be right - nobody knows for sure, but I like the sentiment. Hedge Funds are Net Short Gold for the first time, "China has announced much lower reserves than expected" and I personally tired even to think about the "barbaric relict" which is going to zero. Before I make my best trade shorting Gold into the dust I would like to throw some charts and links for Lithium induced meditation.
First chart above actually shows a wash out capitulation and Buy signal on Volume and Candles, all indicators are positive for reversal. Dan Popescu @PopescuCo has published few very interesting charts below and HedgehogTrader @HedgehogTrader has exceeded his monthly limits of tweets about the yellow metal on Friday. In case if rumours about Gold's Death are exaggerated, TNR Gold's "Vault" is still secured in Alaska and guarded by bears waiting for its time to come.
NOVAGOLD reports about the progress with permitting Donlin Gold and technical studies on Galore Creek. TNR Gold is developing Shotgun Gold project in Alaska and is looking for strategic partners to advance it.
"Nova Gold has published its new presentation for PDAC 2015. Now you can find more information about Alaska as mining jurisdiction and Donlin Gold type of Gold deposit. TNR Gold owns 100% of Shotgun Gold project in Alaska, which has very similar geology to Donlin Gold, according to Greg Johnson - one of the founders of Nova Gold. Read more."
For the last three weeks, gold has experienced something that has never happened before - hedge funds aggregate net position has been short for the first time in history.
However, as Dana Lyons notes, this week saw another 'historic' shift in gold positioning as commercial hedgers shifted to the least hedged since 2001... so the 'fast' money is chasing momentum and the 'smart' money is lifting hedges into them.
It's no secret that commodities have taken a drubbing during the deflationary spiral over the past year. And precious metals have been right up front in this beating. This includes gold, which has lost over 40% of its value the past 4 years. So needless to say, there has not been much good news on that front. However, as we touched on in a piece two weeks ago, there are signs beginning to pop up that may provide a glimmer of hope for gold bugs. In dollar terms, the price of gold continues to leak, offering very little evidence of any impending stability or bounce. On the other hand, in Euro terms, gold prices reached a key juncture a few weeks ago, as outlined in that previous post. And while no bounce has materialized as of yet, gold has at least held at the level we noted.
Today's Chart Of The Day offers another hopeful data point for gold bulls. The CFTC tracks the net positioning of various groups of traders in the futures market in a report called the Commitment Of Traders (NYSE:COT). One such group is called Commercial Hedgers. As their name implies, their main function in the futures market is to hedge. And while the Non-Commercial Speculators tend to be trend-following funds, the Commercial Hedgers' postions tend to move contrary to price trends. Thus, it is almost always the case that these Hedgers will be correctly positioned - and to an extreme - at major turning points in a market.
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."
Disclosure: I am/we are long TRRXF, ILHMF.