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Record Bearishness On Gold; Commercials Go Net Long For Fifth Week

By Mike (Mish) ShedlockCommoditiesOct 07, 2018 04:15AM ET
www.investing.com/analysis/record-bearishness-on-gold-as-commercials-go-net-long-fifth-week-200347279
Record Bearishness On Gold; Commercials Go Net Long For Fifth Week
By Mike (Mish) Shedlock   |  Oct 07, 2018 04:15AM ET
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Commercials Net Long Gold 5t Week
Commercials Net Long Gold 5t Week

Commercial traders are net long gold by the most in 17 years as hedge funds go increasingly short. Commercial traders are net long gold. What's going on?

Some of the commercial traders are market makers who take the other side of trades and are hedged. The other portion of commercial traders are the metal producers.

The metal producers (mining companies) are always net short. That is how they sell product.

Small speculators are also net long. Thus the big specs (hedge funds) are short gold futures in record amounts even though the size of the bar appears insignificant.

Open Interest

Gold: Open Interest
Gold: Open Interest

Long and Short Positioning

The lead-in chart shows commercials are net long and hedged funds net short by small amounts.

But commercials are producers or hedgers, while speculators generally aren't, so a look only at "net" positions is misleading.

Short Squeeze Material

The yellow highlights above constitute positions that are subject to a huge short squeeze.

One can also say longs may bail, but if that happened in isolation, the overall bearish sentiment against gold would be even higher.

Gold Weekly Chart

Gold Weekly Chart
Gold Weekly Chart

Gold sentiment is even more bearish than it was before a major blast higher starting December 2015. Record bearish sentiment of this nature by hedge funds is seldom rewarded.

Record Bearishness On Gold; Commercials Go Net Long For Fifth Week
 
Record Bearishness On Gold; Commercials Go Net Long For Fifth Week

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