Time To Jump On Board The Gold Train - It's Warming Up To Leave The Station

After an 8 month price correction that has been mistakenly taken to be a new bear market by those who are clueless, like Dennis Gartman, it appears that the gold bull is kicking at the gate:

Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold.  They don’t understand what is happening in the physical market.  The bullish fundamentals I just described to you have enormous implications  -  London bullion trader

Here's the short interview which is the source of that quote:  LINK  It is a must-read and the report of large "entities" going directly to gold producers in order to source large quantities of bullion is consistent with other industry insider accounts of this.  I linked one a couple weeks ago.

"Interesting" from my viewpoint because I have pointed to some indicators that likely signal that we are near or at a bottom and that the next extended move higher in gold will likely take us to a new record nominal high in gold. 

One of these signals as discussed yesterday is gold breaking its 200 dma to the downside.  Currently the 200 dma is around $1618 using the Comex continuous futures contract (this would correlate to around $1615 on a spot price basis).

Another signal would be the current long/short Commitment of Traders (COT) structure of the hedge funds (large specs) and the big banks (commercials).  For the duration of the gold bull market, market bottoms have been associated with a low relative net long position being taken by the large specs and a low relative net short position being taken by the price manipulating bullion banks.  That this is the case is indisputable.  Currently the large specs have a very low net long position and the banks have low net short position.  I rehypothecated Ted Butler's latest remark on the COT structure from Ed Steer's Gold & Silver Daily: 

I think the gold COT structure is back to a bullish set up, especially if the improvements after the cut-off are what I think them to be. As such, gold may also be at a price bottom, especially considering the bullish signals (or lack of bearish signals) coming from the gold physical market (ETF holdings, etc.). But to be fair, while gold is near bullish COT readings over the past year or so, on a much longer historical basis there may still be room for further liquidation. My personal sense is that we probably shouldn’t see big further speculative long liquidation in gold and may, in fact, be good to go to the upside. But if the COT structure in gold is bullish (as I think), then silver’s structure is screamingly, super-duper bullish.

Combined, the 200 dma plus the COT signals are quite bullish for gold.

One indicator that I have not seen commentary on is the COT set-up in the euro, and tautologically, the inverse set-up in the dollar.  Currently, the large spec hedge funds are record short the euro, which means they also are very long the dollar vs. the euro.  Conversely, the big banks are primarily the entities which would take the other side of the hedge fund bet, meaning the big banks are very long the euro and very short the dollar.  This is very very bullish for gold. Take a look at this chart rehypothecated from http://www.barchart.com/

(click on chart to enlarge)

The green line that goes below zero starting in May is the short position of the large specs.  You can see how the hedge fund position has shifted from long to short this year.  The red line is the long position of the big banks.  Why would the euro begin to move higher again rather than collapse, like everyone seems to think will happen?  Because I have said all along that I wouldn't be surprised if the EU figures out a way to save itself from extinction.  Hell the U.S. is already printing money to bail out Europe via the up to $1 trillion currency swap facility arranged by the Fed.  This is a de facto QE because it increases the size of the Fed balance sheet until the swap unwinds, if it ever does.  This is printing and this is dollar bearish.  Just wait until the Fed has to start printing to fund 2012 Government spending programs...Don't forget, what's bearish for the dollar is bullish for gold...