Golden Rope-a-Dope

It was another Ali-like rope-a-dope day for gold. Sellers/profit takers pressured bigtime this morning down to $991 and looking like it was lights out for gold, then bit by bit it clawed back with a right cross and and an upper cut closing at $1009 with a strong finish.

If you have watched the action on gold the last several years you have to see that this time this may well be "it's different this time". I am what you call a "cautious gold bull", as so many times gold has gotten smoked once above $1000 but the ability to bounce back a few times now is what has me thinking this time $1000 in a couple of weeks will be the support line the longer this type of buying action keeps up.


Of course on the downside risk there is the record high spec longs you have to be highly concerned about, but with all this Chinese trade wars and massive debt that there just may be some international support for gold maybe not as an alternative, but as a "just in case we're screwed" insurance policy.

Bernake says the recession is over, did the inflation threat play in as well ? So many mixed opinions on inflation, but something has to kick in down the road and that may be what's triggering the gold buyers as they can be very forward thinking.

One final caveat, " COMEX Commercial Traders Have Taken the Largest Net Short Position Against Gold & Silver Ever on Record". Usually a very strong sign of a sell down coming but the longs are record too and greater than the record shorts according The Aur Report :



"It is not unusual to see commercial traders go heavily short when gold makes a big run, but they have effectively gone "all in" this time with their total net short position setting a new record. These are presumably the most well-informed traders or "smart money." While this news is usually very bearish and a preclude to a massive sell off, it is interesting to note that the commercial net short position increase was actually less than the increase in total open interest. In other words, despite taking record short positions against gold, they were unable to absorb all of the buying pressure."


Some of the quotes from Goldessential.com were interesting:

"The trader pegged resistance ahead of $1,015 an ounce, the COMEX December gold high from February. “Above that could launch us towards the all-time high of $1,060 an ounce”, he added. "


"A COMEX floor trader added that “this is the second consecutive session that the contract [December] managed to post a settlement above the figure, which seems fairly constructive and still implies the potential to run higher”.

"He added that “there however seems to be a strong hand that is buying any dips. It looks too concentrated to come from various players”."




As always, caveat emptor !