The emergence of technical fund and speculative short selling has created the finishing touches to a market structure set up that is good to go in gold and maybe in silver as well... The bottom line is that an important price low is being put in, if it has not been seen already. - Ted ButlerMy corollary to Ted Butler's statement is: outside of 2001 and October 2008, right now is currently the single best time to invest in the precious metals and mining stock sector over the course of this 12-yr - so far - bull market. What makes now potentially more compelling than 2001 and 2008 is that the fundamental reasons for investing in this sector are stronger than at any time over the last 12 years.
Here's just one example: back in 2001, the notion of a global currency debasement war was nothing more than the fantasy of gloom and doom conspiracy theorists. Today, the world is in the middle of a currency war that intensifies with every official pronouncement that denies its existence (see the recent G-20 statement).
I wanted to follow up on my article last week that analyzed the Comex Commitment of Traders (COT) for gold futures. I had suggested the likelihood that the recent increase in the gold futures short position of the large hedge funds, and the concomitant large reduction in the net short position of the commercial traders (mainly the bullion banks), was a signal that this vicious price correction in gold/silver is nearly over.
The COT report released Friday (through Tuesday's cut-off day) was nothing short of stunning. I knew the hedge funds were piling onto the short side of gold and silver, and that's why the metals have been getting slaughtered recklessly like this. But the increase in the hedge fund gold short position is unprecedented, as far as I know. You can read my latest analysis here: Holy Hedge Fund Shorting
We probably won't see an immediate "V" type move here (although I wouldn't rule it out). The large hedge funds have no choice but to defend their massive short position. But as the physical market off-take intensifies - India and Asia have both been buying hand-over-fist over the last week (and that's physical off-take, not fraudulent paper contracts). But, as the impending move higher builds momentum and pushes through key technical price points, the scramble by the hedge funds and small speculators to cover their unprecedented short position will ignite a move that will be explosive.