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October
17
2016

More Good News For Gold Bugs: The Bottom Is Getting Closer
John Rubino

This year’s recovery in precious metals prices – and the sudden spike in gold/silver mining stocks – convinced a lot of people that a new bull market had begun. Last week’s brutal smack-down scared the hell out of many of the same folks.

In the latest gold and silver commitment of traders (COT) report, paper players made big strides in bringing the market back into balance — and setting the stage for an eventual rebound.

Speculators – who tend to be emotional and therefore wrong at the extremes – scaled their long positions way back.

The commercials – who time-and-again sucker the speculators into those emotional extremes and then fleece them – are now considerably less short.

Here’s the raw data, courtesy of GoldSeek:

And here are the changes from the past two weeks in percentage terms.

When speculators are scaling back their longs and commercials are scaling back their shorts, that’s a sign that the market is moving towards balance. The longer these trends continue, the more likely it becomes that precious metals prices will rise in the ensuing six or so months.

That inflection point (when downtrend becomes uptrend) may still be a ways off, however. The players in this market had placed such extreme bets that even after two weeks of slimming they’re still positioned fairly aggressively. In other words, speculators are still pretty long, so if this indicator remains valid more price declines are in the cards.

But another few weeks like the last two and we’ll be close. So now might be a good time to start nailing down target prices for favorite miners and perhaps entering some low-ball bids.

This bottom, when it comes, could be an important one for a variety of reasons, including the sea change taking place in the thinking of the world’s major governments. Since their recent aggressive monetary ease didn’t work, they’ve apparently decided to repeat the experiment with an extra zero or two (see The Floodgates Begin To Open). This combination of low-to-negative interest rates and insanely high government deficits will create an environment in which gold and silver – bought at the right price – should be among the best things to own.

DollarCollapse.com is managed by John Rubino, co-author, with James Turk, of The Money Bubble (DollarCollapse Press, 2014) and The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He currently writes for CFA Magazine.

 

 

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