>>Gold COT is saying smackdown treatment is next in store for
the bugs. Trade carefully.
321gold.com
Vi -- I have always been puzzled about the conclusions drawn from the COT data, perhaps you could shed some light on it.
1. Commercials in my understanding are miners who want to minimize risk, and therefore sell future production at a guaranteed price.
2. Therefore, on a given day, they look at their costs of production, build in a nice profit and trade a contract to sell gold at a fixed price in the future when they will have mined it and refined it.
3. By definition, this is a "short" sale.
4. Later, if the price goes up, this can be viewed as betting the price can go down, but actually its an attempt to guaranty a fixed price for their future production.
5. Therefore, I do not see why this should be negative for the gold price.
6. As for the speculators, I have heard the argument phrased like this:
a. If everyone is in, who is left to buy? Therefore price must go down
One answer could be: Gold market is still very, very small. Most folks in US do not own gold, and I would expect most folks everywhere (except perhaps India) don't own gold. Therefore, the potential investment market in times of currency trouble is very, very large, if these folks who are now out of it happen to get into it, if only just a little.
The amount of these potential participants dwarfs the current players in the commodities market as a pebble to the sand on the beach.
Of course, it is a guess as to when or if the grains will begin to rumble...
I would welcome any new information re above, especially If I have got it wrong...
RJA |
