The Commitment of Traders report for this week reveals pretty much the norm for both the gold and silver markets that we have seen over the past 9 years or so. Speculators consisting mainly of the big funds and the smaller public were buying while the commercial category was selling. First for gold – managed money flows remain in gold through Tuesday of last week which was countered by bullion bank and swap dealer selling (those two categories can sometimes include the same entity). While the commercial position is not the largest on record, the swap dealer is just shy of a record by some 3,000 contracts.
That sets up a situation where we have a large number of speculative longs sitting in the gold market with prices stalling out near $1,260. The potential for some stale long liquidation is definitely there as a result of the loss of upside momentum so we will want to see how price acts should any downside technical levels be taken out. Quite frankly I would like to see some downside movement in gold just to test the market action to see how aggressive dip buyers will be. Today they were obvious with the decent sized push up off the worst levels of the session. If they continue this sort of stand, bears are going to be quite frustrated and some of the weaker hands will be forced to cover. One way or the other we are going to see rather quickly what kind of strength is in this market. (more)
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