You play to win the game...You don't play to just play it - Herm Edwards, when he was head coach of the NY Jets LINKIn order to win the gold/silver game, spotting critical information and knowing how to use can give us an edge over the rest of the market. Using the COT report as source of information has proved useful over the last 10 years.
Last week I suggested that the COT report might show that hedge funds have started to chase the momentum of the gold market lower by shorting gold contracts, while the bullion bank cartel used the extra selling from hedge fund short-selling to cover their shorts. I suggested this dynamic would likely mark a bottoming of this latest bullion bank paper market take-down of the price of gold/silver.
The CME/Comex Commitment of Traders report released Friday, which shows long/short open interest positions by trader category through the previous Tuesday, shows that indeed the hedge funds began to short Comex gold futures in decent size and the bullion banks continued to aggressively cover their short positions.
We've watched the banks cover their shorts quite aggressively for the past few weeks, but when the short-covering by the banks continues, aided by additional hedge fund shorting, it has over the past couple of years signaled that the metals are bottoming and getting to move a lot higher. You can find my analysis, with data links, here: LINK
It might not happen quickly, and this next week or two is usually characterized by low-volume, directionless trading, but it is likely that gold and silver are now set up technically to move a lot higher. As we all know, this technical set-up is reinforced by unprecedented fundamentals.
I've been doing my best to not gloat about the Denver Broncos' season, but it now looks like the Denver will likely emerge as the odds-favorite in Vegas to win the Super Bowl after that total thrashing San Francisco took last night (SF had been the prior odds favorite, Denver was #2). Have a Merry Christmas/Happy Holiday.