It happened at last. Now there is high or even extreme pessimism among big speculators trading precious metals futures on the COMEX. Look at these two charts:
source: Simple Digressions
and this one
source: Simple Digressions
The chart shows current (as of May 15, 2018) net positions held by money managers (big speculators) in gold and silver futures at the COMEX. Note that these traders are very pessimistic about gold (red circles on the upper panel of the chart) and silver (blue circles on the lower panel).
For example, money managers trading silver futures hold a large, net short position. Interestingly, even at the end of the latest bear market in precious metals (December 2015) these speculators were less pessimistic.
The same pattern is visible on the gold chart - yes, money managers are now less pessimistic than at the end of 2015 but their pessimism is comparable to that visible at the latest bottoms (red circles).
As a result, as a tough contrarian, I am once again optimistic about gold and silver in the short and long-term perspective.
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After the FED's decision to keep interest rates unchanged the gold was quite strong. Despite the US dollar making another ultra-short term top, gold prices held well:
source: stooq.com
Note that yesterday (May 1) the US dollar broke above its resistance (the red line) but gold did not break below its ultra-short-term support (the green line). So there is a small, positive (for gold) divergence.
What does it mean? Generally, in the long term it means nothing at all (the big picture remains unchanged) but in the ultra-short-term we may see gold prices going a bit higher now (as I wrote in my latest piece - it is a very primitive short term trade).
What is more, the GDX / gold ratio is supporting a relatively bullish thesis on gold:
source: Simple Digressions
As the chart above shows, since late March 2018 the ratio has been in its upward trend. Interestingly, this time it is a promising medium-term signal (the shares of precious metals mining companies are stronger than bullion). It looks like Mr. Market wants to tell us:
"Not everything is that bad with precious metals as it looks"
