Taking a very close look at big money, we see on Oct. 1 in the Legacy report Commercials net short -269,270 contracts and gold was trading at $1,780. As of the most recent COT release, we see Commercials net short -22,776 contracts — a huge drop — and you see Friday’s close at $1,212.70. That is a drop of $567.30.
For the more transparent view of big money I look at the Disaggregated report where we saw the sell side of gold, the Producers, net short -216,256 contracts, and the Swap Dealers net short -53,014 contracts on Oct. 1. The buy side Managed Money on Oct. 1 was net long 162,990 contracts.
Moving to the report released yesterday, July 8, the sell-side Producers are net short -15,190 contracts, Swap Dealers are net short -7,586 contracts, and the buy side Managed Money is net long 21,384 contracts.
I think you can see how the movement of big money was a major reason for the steady continued drop in gold. Looking back at the last time gold tested $1,200 back in July 2010, you see slight liquidation by big money. Since October 2012 we have seen massive liquidation by big money. If you look back further, this drop could be historical.
So, if you want to know the best time to go long gold make sure you keep an eye on big money. Once the posture changes from bearish to bullish where do you think gold will be headed? That is correct up, up, and away.
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
Proceed to Page 3 for this week's detailed fundementals...