by Dave Kranzler, Investment Research Dynamics:
The price of gold ran up 20% since the beginning of 2016 through early March. In response to “overbought” readings in the popular momentum indicators, the superficial gold commentators become short term bearish. Additionally, based on what appeared too be a heavy “off-sides” in the bullion bank net short position vs. the hedge fund net long position in Comex gold futures, per the Commitment of Traders report, the “big price correction” side of the ship deck became heavily mobbed with short-term timing forecasts.
About two weeks ago, I decided to roll up my shirt sleeves and dirty up my hands with the COT data compiled by my business partner going back to early 2005.
What I found in terms the current net short / net long positioning between the bullion banks and the hedge funds might surprise a lot of observers. Of course, I presented the information to the subscribers of my Mining Stock Journal in the March 17th issue (along with a relatively undiscovered “de-risked” junior mining stock idea with substantial upside, risk-adjusted).
As it turns out, while the net short position of the criminal banks is above the average net short position from 2005 to present, it’s not even remotely close to the net short position historically that has signaled an imminent price-smash operation. Currently the net short position is 200k contracts. But the highest that net short since 2005 has been is well over 300k. The net short position was well over 200k for large portions of 2010.
In other words, while there is some concern that the cartel is set up to force the price of gold lower by bombarding the Comex computer system with paper gold detonators, the comparative historical statistics suggest that gold has lot more upside and the open interest has a lot of room to expand before the cartel is in a position to throttle gold lower.
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