Gold Bears Press Bets in Record Numbers

Gold shorts are near a record high as saturating bearishness sets in.

The Wall Street Journal reports Gold Market’s Slide Brings Out the Bears.

Investors are placing a record number of bets that a protracted slump in gold prices will continue as the metal is punished by a strengthening U.S. dollar and rising interest rates.

Hedge funds and other speculative investors have increased wagers that gold prices will fall over the past five consecutive weeks, pushing them to their highest level ever during the week ended July 17, according to Commodity Futures Trading Commission Data going back to 2006.

As speculative investors have turned bearish, money managers began pulling money from gold-backed exchange traded funds. Investors yanked more than $2 billion out of gold-backed ETFs in June, the largest monthly outflow since July 2017, World Gold Council estimates show. Demand for American Eagle gold coins, a proxy for physical demand, has also been weak.

“This suggests that short sellers are pressing their bets,” Sundial Capital Research’s Jason Goepfert wrote in a note to clients last week. Typically the opposite happens when gold prices are bottoming out.

Horse in Front of the Cart

That article is an accurate assessment of what is happening.

It portrays what I said several days ago in Putting the Cart Before the Horse: Gold Hype.

Sentiment Souring

Sentiment has soured with gold going sideways. Setup looks great.

Mike "Mish" Shedlock

Comments (6)
No. 1-6
killben
killben

Mish,

The market seems to be comfortably shrugging off all uncertainty and seems to be on the verge of breaking through and making a new ATH. Your take on this?

RedQueenRace
RedQueenRace

The odds of it making it may be higher than you think.

The SPX has 3 gaps remaining. One is at the 2872.87 ATH it closed at on January 26th. It gapped down the following Monday, followed by a huge gap down on Tuesday, which left a partial (from the previous close) gap from 2853.53 and a full (from the previous low) gap from 2851.48.

I have figured the market would make a serious attempt to close all these gaps. Yesterday it made a huge run at the 2851.48 gap but fell short. It was likely to pull back (gap resistance) before attempting to close it, especially after a big run like that, and FB blowing up is certainly helping but probably won't stop it from trying again and again until it eventually gets it. If Seeking Alpha is any indication, the world sees this FB disaster as a huge buying opportunity. If it's buy-the-dip for big money as well, when it rallies back that will be used to help continue the technical gap-fill drive.

If fills the next 2 gaps, sights will be set on the ATH. But folks need to consider that this market is in a race against time versus the Fed tightening and liquidity drain (now $40 billion / month) and even if it does hit the ATH and make a new one it does not necessarily mean it is "game on" again. The market can do some pretty amazing stuff but it can't fight the Fed forever.

shamrock
shamrock

Gold is only going sideways if you look at a very long term chart. It's down 10% in 3 months, well below moving averages, and the 50 day moving average "death crossed" the 200 day about a month ago.

Bam_Man
Bam_Man

Gold is "going sideways" in $USD terms, but doing much better against most other currencies.

niceconstable
niceconstable

Gold should rally. But not for long. Just the eye of the hurricane. Gold is being driven by non-orthodox matters. Next down leg will be coincident with much economic trauma in the world.