CHART: Another sign precious metals are close to a bottom

From Justin Brill, Editor, Stansberry Digest:

Another great sign for precious metals…

Last month, we explained that the precious metals sector was looking a little “frothy.”

According to the U.S. government’s Commitments of Traders (“COT”) report, speculative traders had become incredibly bullish on silver, in particular. We warned that a further pullback was likely as this sentiment extreme wore off.

Earlier this month, we noted investors were dumping gold-mining stocks at the fastest pace in years. As we discussed at the time, this was a positive sign. We want to see investors throw in the towel before we turn bullish. As we wrote in the May 2 Digest

As longtime Digest readers know, precious metals – perhaps more than any other asset class – are susceptible to dramatic and rapid swings in investor sentiment. And we can use these extremes to our advantage…

When folks are downright giddy about gold and silver, it’s often a bearish sign… It means the rally has gotten ahead of itself, and at least a short-term correction is likely. Likewise, when investors turn bearish, it’s often a great time to buy.

However, while retail investors were selling, COT data showed speculative futures traders had remained relatively bullish. Now they’re giving up, too…

According to the latest COT report published Friday, net speculative positions dropped by nearly 20,000 contracts last week. They’re now down almost 50% from their all-time high set last month…

Speculative bets on gold – which remain below their 2016 record high – have also plunged. Net speculative gold positions fell by nearly 50,000 contracts last week, the largest weekly decline in more than five years.

Again, this is a good sign… It’s what needs to happen before a meaningful bottom can form. But we’re still not ready to give the “all clear” just yet…

Despite these big declines, bullish bets on both gold and silver remain above levels that have marked significant bottoms in the past. History suggests gold and silver prices could fall farther as the last remaining bulls give up.

× Subscribe to Crux
Want more posts like these?
Like us on Facebook?
Crux Contributors