Record Bearishness on Gold as Commercials Go Net Long Fifth Week

Commercial traders are net long gold by the most in 17 years as hedge funds go increasingly short.

Commercial traders are net long gold. What's going on?

Some of the commercial traders are market makes who take the other side of trades and are hedged. The other portion of commercial traders are the metal producers.

The metal producers (mining companies) are always net short. That is how they sell product.

Small speculators are also net long. Thus the big specs (hedge funds) are short gold futures in record amounts even though the size of the bar appears insignificant.

Open Interest

Long and Short Positioning

The lead-in chart shows commercials are net long and hedged funds net short by small amounts.

But commercials are producers or hedgers, while speculators generally aren't, so a look only at "net" positions is misleading.

Short Squeeze Material

The yellow highlights above constitute positions that are subject to a huge short squeeze.

One can also say longs may bail, but if that happened in isolation, the overall bearish sentiment against gold would be even higher.

Gold Weekly Chart

Gold sentiment is even more bearish than it was before a major blast higher starting December 2015.

Record bearish sentiment of this nature by hedge funds is seldom rewarded.

Mike "Mish" Shedlock

Comments
No. 1-3
MorrisWR
MorrisWR

I am long gold. I still do not see much downside this year (perhaps we hit the low or mid1100’s before a bounce). Record bearish numbers are positive for my trading style.

everything1
everything1

Gold futures are pretty flat long term. Americans don't really need gold since they have the world reserve currency. But, with interest rates so low, and the long term trend going to zero and negative.. why the gold rush? Still, go to a country where they know substantial inflationary times are a part of life and buyers are frequent. Central bankers are also stacking like never before in history, their #1 reason is hedging, but the reality is that they are hoarding which is the historic norm for the yellow metal, it has little use otherwise.

RonJ
RonJ

"What's going on?"

The greatest financial fraud in the history of the world.

Interest rates are said to have been the lowest in 5,000 years. 5,000 years ago was 3,000 B.C. Incredible. Denninger noted today that in the last 12 months the increase of federal debt exceeded the increase of GDP. As such, in real terms the economy shrunk. Global debt is now some 250 TRILLION dollars, a mind boggling number. Interest on the national debt has now hit 523 billion dollars.

But the dollar is the world's reserve currency and how does that skew the picture in relation to other currencies and to gold? We have gone from a mantra of one and done, to now several FED rate hikes in defiance of that. The 10 year has broken past 3.00%, rather than falling and inverting the yield curve. Is it a spike or something more? The thing is, what is there to trust anymore?