GOLD: What the ‘smart money’ is telling us today
From Jeff Clark, Editor, Stansberry Short Report:
Let’s hope the commercial traders are right.
If they are, we’ll get one more chance to buy gold at lower prices.
And it may be our last.
Let me explain…
Back in December, the weekly Commitment of Traders (COT) report showed that commercial traders’ net short interest in gold had fallen to less than 6,000 contracts – the lowest level in more than 15 years.
And it was a big sign that the price of gold was nearing an important bottom.
You see, commercial traders are the “smart money.” They’re merchants, miners, explorers, and bankers in the gold business. They use futures contracts to hedge their exposure to gold and protect themselves from adverse downside moves.
The short position in gold is almost always a positive number – meaning that commercial traders are usually short the metal. That makes sense… since most commercial short positions are hedges against future declines in price.
For example, if a major gold producer wants to lock in a guaranteed price on its gold production, it will short gold in the futures market – thereby hedging its bet.
When gold is trading at a relatively high level and commercial traders expect it to be lower in the near future, the COT short interest often runs to more than 150,000 contracts. (In gold bull markets, the net short interest can run as high as 300,000 contracts.)
But when gold is trading at a low price and commercial traders expect it to increase, the COT short interest often drops to less than 50,000 contracts.
So when it dropped to less than 6,000 contracts in December – when gold was trading for about $1,060 per ounce – the smart money was screaming at traders to buy the metal.
By mid-March, gold was trading at more than $1,270 per ounce. That’s almost a 20% gain in less than three months.
At that point, though, the smart money was leaning bearish. Commercial traders had built their net short position in gold back up to 195,000 contracts. So I suggested it was time to take profits on the gold trade.
Since then, gold has fallen about $50 an ounce. But according to last week’s COT report – which includes positions as of last Tuesday – commercial traders have increased their net short position to 206,000 contracts.
That means that gold is likely to pull back even more in the short term. So traders should get an even better buying opportunity in the weeks to come.
Don’t miss it.
I own gold for the long term. And I’m looking forward to the chance to buy more of it.
As governments around the world continue to print money and central banks push interest rates into negative territory, the long-term case for owning gold gets stronger.
But there’s a new and even stronger argument in favor of owning gold. It’s not a conspiracy theory, and it’s not a gold-bug delusion. It’s a real-world, catastrophe plan in the making. It’s happening right now. It will change the currency markets for generations to come. And it will send the price of gold into the stratosphere.
That means the next dip in the gold market may just be your last chance to buy gold at a reasonable price.
My friend and colleague Porter Stansberry is hosting a live Emergency Briefing to talk about the dramatic changes about to happen in the currency markets and the factors that will send the price of gold sharply higher. It’s frightening. But it’s also exciting if you’re on the right side of it.
The briefing is Wednesday night at 8 p.m. Eastern time. I’ll be watching, and I hope you will be, too.
To sign up for the free briefing, click here.
Best regards and good trading,
UPDATE: If you missed Wednesday night’s event, don’t worry. We cover all the same details in this new presentation, which you can view right here.