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Lightning-Fast COT Reversal: Now Fairly Bearish For Gold And Silver

That didn’t take long at all. Just a few weeks after the Commitment of Traders (COT) Reports for gold and silver turned positive – setting off a nice rally in both metals’ prices – this indicator has flipped back to strongly negative.

In gold especially, speculators (always wrong at big turning points) have loaded up on long futures contracts while closing out their short positions. The commercials (always right at big turning points) have done the opposite, closing out long positions and going aggressively short.

In the week ended August 15, the gold speculators and commercials got about 10% more long and short, respectively. That’s a big one-week move, and brings the imbalance between good and bad positions to nearly 3-to-1 bearish. The trends in silver, while not as extreme, still point in a bearish direction.

Here’s the action presented graphically, with the silver lines on the top half of the chart representing speculator long positions and the purple bars below indicating commercial shorts. Note the leisurely pace of previous months, and contrast it with the v-shaped move that just took place. Not sure what that means, other than that speculators hoping to ride a longer upswing might be disappointed.

It’s important once again to note that the COT report is not a day-trading tool. Historically it’s been a pretty good indicator of the general trend over the following six or so months. But it has nothing to say about tomorrow or the day after. So it’s irrelevant for stackers and other long-term accumulators. But it is useful for someone who has their eye on a given gold/silver mining stock and is looking for a good entry point – which in this case might be a few months in the future.

Another point that bears repeating is the temporary nature of this indicator. Eventually, fundamentals in the form of surging demand for physical precious metals will swamp the paper market. Gold and silver will soar regardless of which futures players are long or short.

12 thoughts on "Lightning-Fast COT Reversal: Now Fairly Bearish For Gold And Silver"

  1. It may be that the cyber currency craze (mania if you prefer) has induced many to dump their metal to buy these booby trapped investments; however, I reside in a major metro area and my metals dealer doesn’t confirm that people are dumping metal. The silver problem is that when COMEX can’t control the price, Uncle Sam looms with prospective nationalization, because TPTB have never allowed silverites to have any final victory. Message your State lawmakers asking them to declare against Federal metals grab in their states to shield their state residents from a 1933-1937 repeat gold and silver grab. Excuse to take gold is for monetary system; excuse to take silver is “we have no military stockpile.” We have been set up on a long term basis by the same old-line families active in the Crime of 1873.

    1. Maybe some of these hustlers will start to buy Tulips soon,that was very trendy in Holland way back when!

  2. Hi John
    I have been a long time for her since 2008 Airport at the bottom and brought it to the top and then running again to the bottom and I’m going to sell now because I firmly believe that the speculation you’ve been saying that this huge accumulation is coming is wrong. I really believe that

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