"I still hate crude oil and believe the next surprise will be lower rather than higher. But a little weekend thinking has forced me to re-evaluate the true extent of the supposed extreme speculative positioning..."
"There are strong grounds to fade this current rally... I believe that moving against the herd mentality, will likely bear fruit in what is probably going to be an even more intense roller coaster ride than what we witnessed in 2016." - David Rosenberg
Typically, a bottom occurs when both commercials and speculators are flat, and the latest report is still a long way from that. But if things stay this way, this indicator, at least, will be screaming “buy gold”.
All this talk of massive new infrastructure spending financed with a tsunami of freshly-minted currency should be lighting a fire under gold. That it hasn’t is a testament to how out-of-whack the precious metals market had gotten during the first six months of this year.
It is critical for the markets to “hang on” to current support at the previous breakout highs. A failure to do so will put the markets back into the previous trading range that has existed going back to 2014.
The gold trading Commitment of Traders (COT) report, released Friday, shows the peculiarly timed gold sell off and much needed wash out of speculative longs out of the gold futures market last week sets gold up for lower prices, prior to moving higher again.
Record levels denote the point that previously marked the end of a cycle, not the beginning of a new one. This point is often missed by the mainstream media. Record highs of anything, whether it is economic, fundamental or financial data, are warnings signs of late stage events.
Once this process gets going it will quickly clear out the inventories of the Western exchanges, leaving nothing for future arbitrageurs. The exchanges will then force those wanting delivery to accept cash instead, in effect defaulting on their promises. Then it’s game over, with the big futures manipulators no longer a factor in pricing.