On the commercials "being wrong this time"
The commercials who steadfastly short rallies, either in manipulation of the market (?) or as part of their commercial hedging activities are wrong every time, until buyers, exhausted and fully extended, begin to sell on balance and prices roll over. The commercials' addition of 24.3K new net short contracts to a total of 98K gets them up to historical extremes. It is very possible that the level of extreme could be higher "this time" than it has been in the past or was most recently n January, but that it'll be much more is a bet against history.
See the COT chart below....At 98K short this is one time in four in history that they've racked up this level of short position.....every time before the market has reversed...and it did again this week at $373, yes, so far.
COT chart.
sharelynx.net
The Silver commercials needed less energy or a smaller net short position to turn back the tide at $4.80+ this time relative to late January - a 55K net short position was all it took this time…
sharelynx.net
(Note the above referenced charts are yet to update, but with the information above one can extend the lines….)
A bet against the commercials at their extremes of "net shortedness" is a much higher risk lower return bet than the same position is when taken if the shorts are much less net short, having covered. That's the history, certainly since the mid '90s.
If the dollar doesn't continue its way down next week I'd say the distributional pattern forming has a very good chance of completing with a spill in prices, then, to the high $350s as a first leg. Such might not be catastrophic and wouldn't be terminal to Gold's longer term trend. However, a lower high will be in, reached with less momentum than the last high in February. This is a point even more pronounced in the miners.
cairns.net.au
Bias, I have a miner position which was reduced on Friday. |
