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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (31459)4/30/2005 9:08:43 PM
From: regli  Read Replies (2) of 110194
 
My point was that based on Adam Hamilton, small specs are extremely bearish which should from a contrarian perspective be bullish for gold. Given the present risky financial climate, if more large players were moving into the market then open interest and commercial shorts would have to increase substantially.

From a fundamental perspective, it is also important to note that Swiss gold sales are over now. The massively increased cost to mine gold profitably combined with the increased demand should also support the gold bullion price. My hunch is that we are moving into a different phase though to hedge my bet, I sold a few contracts.

Here some quotes from the article:

news.goldseek.com

"Since early 2003 though, the trend of small spec net long positions in gold futures has been down. Yes down, you read that right! If the net long position in gold futures by small speculators is a valid indication of popular euphoria, then gold sentiment is no more euphoric today than its was way back in late 2001. For nearly four years now small spec net longs have generally hovered between 25k to 50k contracts. The thesis that gold is in a small-investor-driven speculative mania could not be farther from the truth!"

Here are some comments on the large commercial short position from the same article.

"One of the most common bearish CoT arguments I hear is the dangers in the commercials being heavily short. If one is not familiar with the futures markets it is easy to see how this idea can spook investors. In reality though, as this chart shows, there is nothing new or anomalous about the hedgers taking the short side of the gold futures trades.

In fact, for the entire gold bull to date the net short position of the commercials has been rising relentlessly yet gold still powered from $250ish to $450ish! If you had believed the naysayers who I remember well from 2001 that claimed at that time that the commercial shorts meant gold was capped and could not rise, then you would have missed the entire gold bull to date. The logic behind fear of commercial shorts is just as flawed today.

Remember that commercials are hedgers, they are usually involved with physical gold in some way and have business risks directly tied to it. In miners’ cases, they dig up gold and sell it. They can wait to sell it until it is actually mined and refined into rough ore bars or they can try and lock in today’s prices for actual future sales. Now even if you loathe producer hedging as much as I do, the underlying logic is still easy to understand."
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