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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (20644)10/25/2004 11:25:07 AM
From: ild  Read Replies (1) of 110194
 
Date: Mon Oct 25 2004 10:51
trotsky (gurk, 7:37) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
yes, the commercials sell into every rise in the PoG, but one needs to keep in mind that everything they have already sold can not influence the market anymore - only the future actions of market participants can.
so it is more important to focus on the net positions of the speculators, since they hold a big long position that will at some point have to be sold down in order to take profits.
therefore a gold rally's durability depends on whether the speculator position is in 'strong' or 'weak' hands. in this context it's noteworthy that there seems to be a certain 'base position' size that definitely IS in the hands of strong position players, since it has been kept constant throughout the ups and downs since late '01. judging from the contract's history since then, i estimate this position to be about 65,000 - 80,000 contracts, while the long exposure in excess of this represents more short term oriented, 'technical' money, i.e. funds committed only as long as a certain set of technical conditions prevails.
note btw. that the hedgers tends to be more eager to sell in the early stages of rallies and near the extremes at the end of rallies. they often become less enthusiastic sellers following technical break-outs.
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