Loading ...Precious Metals
The Commitments of Traders (CoT) structure for gold is generally thought to be bearish on a contrary basis.
Sure, gold’s CoT is in a state where a significant pullback could come about. It is also in the state it would necessarily be in after a strong bull move and breakout from very notable resistance. It simply means that large speculators are very bullish and commercial hedgers – of varying flavors (banks, miners and sure, if the conspiracy theorists are correct, a few nefarious enterprises L) are on the other side of the trade, as they always are. So the key question is not ‘who are the evil forces that want to “smash” gold?’ but instead, ‘how long will the large specs be right?’
Well, from 2009 until well into 2011 the large specs were very right until they got wrong as Ben Bernanke finally unveiled (and count me as a conspiracy theorist here) Operation Twist with the intent of killing inflation signals and forcing the yield curve to stop steepening and begin a flattening trend that endured until 2019.
Bottom Line: We should follow the fundamentals and the technicals and leave CoT a distant third in managing the short to intermediate-terms in gold and gold stocks.
As for silver, it’s CoT situation (chart below) is not near an extreme and that leaves some room for a catch-up move and possibly a take over of precious metals leadership. Again, CoT is just one angle of a view into the workings of the precious metals but the alignments are in concert with our current expectation for silver to eventually take over from gold IF the macro is to go inflationary. That’s still an ‘if’ until it happens, but I like the states of the Au & Ag CoTs with respect to a future inflation view.