Bullish COT data sets stage for higher gold

Each Friday, we put Commitment of Traders (COT) data under the microscope.  Specifically gold.  Most weeks it’s pretty ho-hum.  This past week -- Friday May 4, 2013 --- anything bu

We did a double take:

Net commercial shorts minus net commercial longs was in five figures.  In the raw data, http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm, it’s listed as Comm_Positions_Short_All minus Comm_Positions_Long_All.  “Comm” stands for commercials, i.e. producers, the ABXs, GGs, NEMs, et al.

Gold price	COT report date	Comm_Positions_Short_All minus Comm_Positions_Long_All
1470.70	5/3/13	95,563
1471.50	4/26/13	104,388
1405.50	4/19/13	141,929
1487.70	4/12/13	143,802
1578.30	4/5/13	142,522
1598.25	3/29/13	158,473
1607.90	3/22/13	162,364
1592.90	3/15/13	142,121
1579.20	3/8/13	133,798
1576.30	3/1/13	137,620
1581.50	2/22/13	132,082
1607.00	2/15/13	160,653
1669.00	2/8/13	174,607
1668.10	2/1/13	167,097
1659.30	1/25/13	195,950
1685.00	1/18/13	185,113
1663.30	1/11/13	178,472
1656.80	1/4/13	188,659
1657.50	12/28/12	187,664
1655.50	12/21/12	202,134
1696.20	12/14/12	214,880
1704.50	12/7/12	217,596
1715.00	11/30/12	252,047
1752.00	11/23/12	236,064
1712.90	11/16/12	224,795
1730.80	11/9/12	207,742
1676.90	11/2/12	222,764
1712.10	10/26/12	232,665
1720.50	10/19/12	247,383
1755.80	10/12/12	266,988
1778.40	10/5/12	269,270

How long had that been?  We went looking and found it:  Dec. 12, 2008 (See below).  Four and one-half years ago.

1161.40	12/4/09	308,231
1166.50	11/27/09	306,104
1150.10	11/20/09	281,546
1118.50	11/13/09	282,784
1097.00	11/6/09	283,852
1046.10	10/30/09	283,479
1054.70	10/23/09	297,493
1052.90	10/16/09	295,926
1048.00	10/9/09	281,864
1004.00	10/2/09	275,234
990.70	9/25/09	287,610
1006.00	9/18/09	284,661
1005.70	9/11/09	270,797
994.10	9/4/09	216,708
956.10	8/28/09	211,342
953.90	8/21/09	204,545
953.60	8/14/09	222,905
956.00	8/7/09	228,193
953.20	7/31/09	202,521
952.30	7/24/09	204,226
935.70	7/17/09	182,287
911.70	7/10/09	191,307
932.50	7/3/09	197,818
938.60	6/26/09	194,430
933.70	6/19/09	207,368
938.80	6/12/09	225,047
954.30	6/5/09	226,521
979.10	5/29/09	208,136
956.70	5/22/09	183,065
931.20	5/15/09	171,180
914.50	5/8/09	160,445
885.30	5/1/09	153,419
912.70	4/24/09	149,608
866.80	4/17/09	153,509
880.00	4/10/09	153,223
894.30	4/3/09	181,926
923.00	3/27/09	181,289
952.60	3/20/09	175,684
928.10	3/13/09	172,851
938.40	3/6/09	188,401
942.20	2/27/09	190,936
994.70	2/20/09	196,360
941.10	2/13/09	188,712
911.00	2/6/09	177,589
926.10	1/30/09	158,376
895.20	1/23/09	138,931
841.00	1/16/09	141,563
853.60	1/9/09	149,482
876.80	1/2/09	142,773
877.80	12/26/08	132,797
837.50	12/19/08	123,111
817.00	12/12/08	94,872

Gold was $817 on that fateful day.    One year later, it was $1161.  A stunning 42% gain.

What is a 42% boost on $1470? 

$2088.

What is the significance of “net commercial shorts”?  This is the hedge position of the ABXs, GGs, NEMs, et al.  These are the producers, typically the ones who “know” when to sell short, when to back off and wait for higher prices.   They are not always right, and these numbers are not infalliable, but usually doesn’t pay to bet against them.

So this Friday’s less than 100,000 print.

Could it be telling us that May, 2014 gold may be selling for $2088?  Or thereabouts?  Could the recent takedown in gold prices be the massive head fake so many have written about?

Stay tuned.