The August gold contract ended last week up $35.2, or 2.22%, and that has people excited. MarketWatch asked, “Is gold set to accelerate higher?” Market Trend Forecast asked, “Is gold ready to run to all time highs?” Martin Pring said, “Quiet action in the precious metals again suggests a big move might be afoot.”
Sentiment indicators also seem to suggest that something significant is happening. The Hulbert Gold Newsletter Indicator (HGNSI) gained 12.5 points on Friday but was still a negative 2.3 points.
LeMetropoleCafe reports that the HGNSI has now been under 20% for 100 days, a record in the history of the index. The previous record, in 2002, was followed by a 10.9% rise in gold in the following two months.
Last Friday, bullion dealer Standard Bank noted: “There currently is a large short position in Comex gold. Since 2004 (when physically backed gold ETFs were introduced to the market), there have been just five times that the size of the Comex gold non-commercial short positions stood out.”
Three of these short spikes were followed by subsequent gains of 25%, 23% and 36%. The exception was the Crash year of 2008. In that case gold did nothing for three months—then rose 19%.
Major bullion bank HSBC has a simpler way of looking at it: “The Commitments of Traders data … for the week ended July 24 showed a 2.3 million ounce decline in net long speculative positions in gold to 13.62 million ounces, compared to the previous week. …Gold net longs are currently near the 13.1 million ounce lows set earlier this year and leaves room from which gold prices may rally on short covering, we believe.”
Excitement is also mounting because last August, gold shocked observers by surging 12.3%. Since Eastern physical off-take became so important, the trade had become used to a sleepy summer, waking up as September approaches.
Last year, the US debt-ceiling crisis was blamed. This year gold is spoiled for choice for potential catalysts between America’s QE possibilities, the euro saga, and of course, Iran.
To read Peter Brimlow article: Is Gold Getting Ready for Take Off?
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