The COTs show that as of last Tuesday, the commercials were net short 66,000 gold contracts. How bearish is this?
George Cole, Steve Saville, and others have described how the commercials are typically short after the 1st leg of a bull market in gold. I concluded that since the commercials have a business which they must protect against the downside, they go long or short these contracts, which they don't have to exercise. After the 1st leg of a bull market in gold, they go short these contracts just to protect their business in case the rally doesn't continue.
The next question that came to mind was, "How short are the commercials right now?". The COTs report shows the status as of last Tuesday when the POG was much higher. Wouldn't it make sense that the commercials went short more contracts as the price went higher? Since it jumped to $288 last Friday, I would think that they went further short there and probably exercised and profited from some portion of the contracts today when the POG reached $275, which you would think they know is now a support level. In other words, maybe what we see in the COTs does not yet reflect the new trading range of 275-298, even if that is what the commercials have in mind.
Does this make sense? If not, could someone please tell me how it really works?
vt |
