"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Saturday, April 27, 2013

Gold Commitments of Traders Report - Update I

Yesterday (Friday) I posted some comments doing a bit of analysis on the Commitment of Traders report for Gold. In those comments I noted that it looked to me as if the General Public, the smaller speculator, usually underfunded and not well capitalized, was holding their smallest net long position going back over a decade.

I have managed to finally find a bit of time to confirm that.

Here is the data in chart format. Note, the general public is the LEAST BULLISH ON GOLD since the very beginning of the decade+ long bull move way back in 2001. You will recall that gold was coming off a twenty year bear market back then.

Even during the depths of the credit crisis in the latter part of 2008, the general public, in spite of a sharp crash in the price of  gold, still remained biased towards the bullish side, even though that sentiment took quite a hit during that downdraft.

Fast forward to this past week and you can see how rapidly sentiment towards gold, on the part of the small speculator, has been damaged. All I can say about this is if the Central Planners wanted to discredit gold as an alternative currency to the Dollar, they have certainly managed to do just that. They have gotten the entire speculative camp, hedge funds, other large reportables and the small speculators selling gold while the bullion banks and swap dealers are in the process of buying it.

Keep in mind that this is using the paper Comex markets as the benchmark against which most of the investment world leans when it wants to know what the price of gold is doing. Most people outside of the gold community do not even know what a gold coin dealer shop looks like or where even to find one. Mention the words, "spot price of gold" and you are liable to get someone asking why the metal is spotted.

Let's keep a close eye on this to see if we can spot any shift in sentiment. Markets that have suffered such brutal maulings need some time to repair the psyche of those who have been on the wrong side of a move of that nature and been devastated as a result.

This is the reason that I am not in the camp with those who believe that we are now going to see an immediate rocket shot higher in gold. I can assure you as a trader that once you are on the wrong side of a trade of this nature, and watched your trading account or investment capital been blasted into the nether regions, you are in no special hurry to plunge right back into that market. You need time to lick your wounds. There are probably people out there who are swearing out loud right now that they will never even look at another ounce of gold, much less plop down money on a gold investment, especially a mining share!

This market will thus need some sort of healing process in my view to convince the skeptics that it is for real.

Those of us who believe in honest money, need to understand that the majority do not look at these things in the same manner in which we do. Thus, the mass exodus out of the Comex gold markets and the gold ETF. If gold can continue to stabilize here and avoid any further sharp downside plunges, that will go a long way to convincing some of the new skeptics that the worst is over and give some the confidence to wade back into the water.

Traders and other investment types will be looking for another retracement lower in price to see where the support emerges. They will be especially interested in seeing where the strong physical offtake begins to fade at these higher price levels.


  1. Most traders will follow your reasoning here and initiate new shorts around the 1500 $ area as long as it holds. Risk reward ratio plus current psychology makes it worth a try imho.
    So unless the bulls are becoming berzerk, or receive unexpected reinforcements (from physical area like huge demand on the wholesale side with very low stocks left?), I don't see a V bottom either here...
    Same for silver of course.
    (silver, potential flag with 28-22 first leg, now maybe up to 25 before new leg would target 19 $ area...and so again, probably shorts will appear around 24-25)

  2. Dan, I would think most physical buyers/hoarders are about as far removed from the Comex traders as any two opposites could be, small spec or otherwise. Hence the big uptick in physical buying on this plunge. I'm not suggesting a V shaped recovery either, but I do think Sinclair and Maguire have it right in that the accelerating physical offtake will at some point render price discovery by the Comex meaningless and force it, along with the bullion banks, into all cash settlements.

    Whatever will the traders do when that happens!

  3. There had been weeks of warning that the gold and silver were going to get hammered. I would have to think most small speculators did take some defensive measures and weren't hurt as badly as you think. The ones that were probably should give up trading COMEX. I have to think the best bet for the small speculator bulls is wait till the feds bomb the market again and gold goes to 1200 area. It makes more sense to get bullish at the low end of the Fibonacci range.

  4. 3rd day bouncing down under the 22 ma daily...(1475 today and going down 5 $ a day)

  5. "The paper market would still like to take gold lower, but in truth it doesn’t stand much of a chance. The price of gold going into the spring and summer and all the way into 2014 is going to make new highs. About that there is no question." Jim Sinclair [http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/30_Jim_Sinclair_-_Media_Blackout%2C_Panic_%26_A_Major_Short_Squeeze.html]

    hope he is right about this one, this time.

  6. Dan,
    today the May contract settled in slight backwardation to the June contract. The rest of the curve is in contango.
    Do you think this is of significance?

  7. 3rd day underl daily ma20.
    As long as it holds (at the close), 1400-1420 $ area = statu quo zone bear/bulls probably to be tested back in may.

    But maybe will break up today.
    I'm watching the continuous depletion of Comex and GLD inventories.
    I'm wondering what will happen when the Boyz become fully loaded long and the only huge short positions left are from heavily leveraged hedgies...and when they abruptly increase margin requirements on the Comex. Short squeeze may be nice the other way around...of course for now, it is pure speculation.

  8. Gold is attacked again this morning... Waiting for Fed statement... what a joke. The manipulators are already well aware of what is going to happen!

    My bet, and it has been working 97% of the time, is since gold is down this morning the FED statement is going to be dollar negative and gold will turn up, but since it is down now the rise will "look" limited... Headlines for the zombies is what counts for the elite.

    By the way, talking about the elite, there are stories coming up talking about politicians who decided to tax the "rich" and other stories talking about the financial elite meeting regularly (Basel)and politicians reaction to the forced austerity imposed by the central banks, IMF...
    Are we seeing the first signs of what I expect is going to happen in the very near future... The fight to death for control of the masses between the financial elite and the politicians? I do think so and gold should go up free of all the manipulation as soon as the market smells blood on the streets.....

  9. This whole thing smells very badly from the financial elite, i.e. JPM. They will do anything to make their "sell" on gold look good and convince the masses to exit. Why on earth would any person of sound mind watching this whole government-Pvt Investment Bank sponsored and initiated financial ponzi scheme ever want the governments and Central Banks to control their destiny is beyond me.
    Riots are now breaking out in Spain, Italy on verge of same, cypriots still havent figured out that their destiny is one of complete darkness. But the Politicians and Bankers continue on stealing and manipulating, doubling down. This will end in only one way. CHAOS. Don Adams and GET SMART would be proud of our Government and Banking system.

  10. silver down...23 $ support of the potential flag.
    If broken, it validates the flag, with target around 19 $...


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