Gold: Getting There A Little At A Time

One of life’s hardest-to-learn but most necessary lessons is that things usually take a lot longer to work out than you’d like them to.
That’s where the sayings ‘Being too early is the same as being wrong’ and ‘The market can stay irrational longer than you can stay solvent’ come from.
A current case in point is gold. After the metal’s decade-long bull market, a correction was inevitable. But when it finally came, rather than being short and cathartic it was long and grinding, stretching from 2012 through 2015 and causing many who got back in prematurely to eventually walk away in disgust.
Then, after a nice pop in the first half of 2016, came the current long, slow-mo correction that’s fraying the nerves of remaining gold-bugs.
This latest correction may not be over, but – based on the Commitment of Traders Report (COT) – the bottom is getting closer. For previous posts on this subject, see here and here.
The COT gives a snapshot of what the big players in the ‘paper gold’ market are up to. On the following chart the gray bars represent long positions held by speculators such as hedge funds, and the red bars denote net short positions held by ‘commercial’ players like fabricators and big banks. The speculators are usually wrong at major turning points, so when they’re extremely long, gold usually falls and vice versa. The commercials tend to take the other side of speculators’ bets, and so are generally right at the big turns.

This post was published at DollarCollapse on JANUARY 1, 2017.