{"id":19953,"date":"2022-07-28T07:30:36","date_gmt":"2022-07-28T11:30:36","guid":{"rendered":""},"modified":"2022-07-28T07:30:36","modified_gmt":"2022-07-28T11:30:36","slug":"the-smart-money-crowd-is-finally-bullish-on-gold","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-smart-money-crowd-is-finally-bullish-on-gold\/","title":{"rendered":"The \u201cSmart Money\u201d Crowd Is Finally Bullish on Gold"},"content":{"rendered":"

Gold has been a miserable investment over the past five months.<\/p>\n

The shiny, yellow metal has fallen from over $2,000 per ounce in March to just over $1,700 an ounce today.<\/p>\n

In the process, investor sentiment has shifted from wildly bullish – with cheers of a new bull market – to horrendously bearish.<\/p>\n

But that’s good news…<\/p>\n

You see, investor sentiment – especially when it comes to gold – is a contrary indicator. Investors get wildly bullish on gold just as the price of the metal is peaking. And they get wildly bearish on gold near the bottom.<\/p>\n

There is however, one group of gold traders that gets it right most of the time. They’re the “smart money.”<\/p>\n

They were turning bearish on gold back in March<\/a> – when everyone else was turning bullish. And they’re turning bullish on gold today while nearly everyone else is bearish.<\/p>\n

Commercial traders are the “smart money” for gold.<\/p>\n

They’re the merchants, miners, explorers, and bankers in the gold sector. They use futures contracts to hedge their exposure to the precious metal and protect themselves against adverse downside moves.<\/p>\n

For example, if a major gold producer wants to lock in a guaranteed price on its gold production, then it’ll short gold in the futures market – thereby hedging its bet.<\/p>\n

Each week, the CFTC Commitment of Traders (COT) report<\/strong><\/a> shows the positions (long and short) of the largest commercial gold traders.<\/p>\n

The short position in gold is almost always a positive number. Meaning, commercial traders are usually short gold futures contracts. That makes sense since most commercial short positions are hedges against a future decline in price.<\/p>\n

When gold is at a relatively low level and commercial traders expect it to be higher in the near future, the COT short interest often drops to less than 200,000 contracts.<\/p>\n

That’s what happened in late January when gold dipped below $1,800 per ounce, and the commercial traders’ net-short position fell to 165,000 contracts. That was the lowest net-short position in over a year.<\/p>\n

The smart money wasn’t too concerned about a further decline in the price of gold. They weren’t looking to hedge their bets.<\/p>\n

They wanted to profit on an upside move. And they got that move as gold blasted above $2,000 an ounce in March.<\/p>\n

When gold is trading at a relatively high level and commercial traders expect the price to decrease, the COT net-short interest often rises to more than 300,000 contracts.<\/p>\n

That’s what happened in late March when the COT report showed that commercial traders were net short 352,000 contracts. That was the largest net-short position of the past year. And we all know what’s happened to gold since then.<\/p>\n

However, last Friday the COT report showed the “smart money” short interest had fallen to just 111,000 contracts. That’s the smallest net-short position in over two years.<\/p>\n

Historically, when the commercial traders’ net-short position gets this low, the price of gold tends to rally.<\/p>\n

Traders should view the 15% drop in the price of gold over the last five months as an opportunity to buy.<\/p>\n

That’s what the smart money is doing. And based on their history, there’s a good chance gold will be much higher in the months to come.<\/p>\n

Best regards and good trading,<\/p>\n

<\/p>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/strong><\/h2>\n

What are your thoughts on the recent action in gold? Do you think it\u2019s time for it to rally?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This group of gold traders almost always gets it right\u2026 <\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19953","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19953","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19953"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19953\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19953"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19953"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19953"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19953"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19953"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19953"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19953"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}