Speculators Throw in the Towel on Gold

Long Liquidation: Large specs reduced long gold bets and increased short gold bets. Small specs increased longs & shorts

The above chart is from 321Gold. It matches the CTFC Report.

Jump in Shorts

Last Week = (101,695 + 41,554) minus the jump (13,396 + 11,449) = 118,404

Increase in shorts = (13,396 + 11,449) = 24,845

Percentage Increase = 24,645 / 118,404 = 20.98%

Long Liquidation

Frequently one hears comments like "commercial reduced their short positions".

While arguably accurate, it conveys the wrong idea.

Commercial traders, except for producers who do sell short, simply take the opposite side of the trade. The commercial traders are not net short, they hedge.

Thus it is a more accurate summation to call this for what it is: Long liquidation. Gold longs are increasingly unconvinced and are throwing in the towel.

Like Hickey, I believe speculators throwing in the towel and betting against gold is ultimately bullish.

Hickey notes "The shorts have to cover." It's important to note that applies to speculators, not producers or hedgers.

Mike "Mish" Shedlock

Comments (19)
No. 1-19
(deleted message)

When the margin calls flood in, everything (including the good stuff) gets liquidated.


Gold will go down as long as interest rates keep moving up. We’ve got a real problem with these guys at the Fed who seem like they want to keep raising rates no matter what happens. Maybe they want us to remember Paul Newman in Cool Hand Luke “What we have here is a failure to communicate”! Or maybe they told the Pope, for heavens sake, to start criticizing derivatives such as credit default swaps, to comfort the world’s credit markets. Personally I’ve pretty much given up trying to figure out what is going to happen next, so I’ll just leave that up to Mish.


No major banking crises in the immediate future, then?


I think the theory is that as rates go up the dollar will strengthen and thus gold declines in dollar terms. In the 70s gold went up as rates went up so who knows. During a financial crisis all assets most likely will decline.