{"id":22088,"date":"2024-08-20T07:30:28","date_gmt":"2024-08-20T11:30:28","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=22088"},"modified":"2024-08-20T07:30:28","modified_gmt":"2024-08-20T11:30:28","slug":"the-smart-money-has-turned-cautious-on-gold-2","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-smart-money-has-turned-cautious-on-gold-2\/","title":{"rendered":"The \u201cSmart Money\u201d Has Turned Cautious on Gold"},"content":{"rendered":"

Gold rallied to its highest point ever last week.<\/p>\n

The price of the shiny yellow metal topped $2,500 per ounce. And, in doing so, prompted cheers of “it’s a new bull market for gold” from long-suffering gold bugs (like me) who’ve waited for this day for a very long time.<\/p>\n

But while gold was rallying – and the public was rushing in to buy the metal – the smart money was turning cautious…<\/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 that 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 last October, when gold was selling off and trading below $1,900 per ounce. The commercial traders’ net short position fell to 97,000 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. They wanted to profit on an upside move.<\/p>\n

<\/p>\n

\n
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Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n

<\/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

Last Friday’s COT report showed that commercial traders were net short 320,000 contracts. That’s the largest net-short position of the past year.<\/p>\n

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

That doesn’t mean investors should sell all their gold or that traders should build up short positions. The long-term outlook for gold remains bullish.<\/p>\n

But folks should be careful chasing the price of gold higher in the current environment.<\/p>\n

We’ll likely have a chance to buy it a bit cheaper several weeks from now.<\/p>\n

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

\"Signature\"<\/p>\n

Jeff Clark
Editor, Market Minute<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Gold may have reached its peak but now you should tread carefully\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-22088","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\/22088","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=22088"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/22088\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=22088"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=22088"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=22088"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=22088"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=22088"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=22088"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=22088"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}