The Commitment of Traders Report And The Price Of Gold – Mike Swanson (08/02/2020)

Year to date the S&P 500 is now up 1.2% as of Friday’s close and the Nasdaq is up 19.7%.

Meanwhile gold is up 29% and silver is up 35.7%.

Mining stocks are up even more with the GDX mining stock ETF up 46.6%.

If you want to beat the markets the simplest way to do it is to be in the things beating the markets. However, the masses are not yet in gold and even those already in it often get worried. Last week gold bumped on the $2000 level an ounce level which some are seeing as a big resistance barrier. So is gold going to have a big drop before it goes higher?

The answer is no according to the commitment of traders report, which gives us a window into what small and large producers and hedgers are doing inside the futures market. The latter group tend to be right on their views on gold as they are not using the futures market to speculate, but to protect their business operations.

As a result they tend to always be net short, but as gold has risen in July they actually cut their short exposure. The commitment of traders report gives us this information and is released by the CFTC every Friday at 3:30 PM and the website Goldseek.com puts it up so it easy to find and read. Here is a screen short from their Friday post.

This report when it is out tells you the activity in the futures market for the 7 days up to the last Tuesday. As you can see in this latest report commercials actually closed out 15,369 of their short contract positions and opened up 10,113 long contracts. The rally did not make them worry about a critical top coming into view at all.

This second screen shot highlights the time period of this report and the action in gold for you.

So as gold broke out inside the futures market the “smart money” players reduced their short positions in gold to tell us that they are true believers of this rally. I see no reason to doubt them and nothing to suggest that gold is going to top out this year at 2000. In fact mining stocks are soaring to confirm the move and now the surprises tend to be to the upside as Aftermath Silver shareholders for one saw last week. As time goes on I believe the masses will finally wake up to the action taking place in the metals markets and start to get in and eventually gold and silver will be seen as many to be a necessary investment in a time in which bonds yield nothing.

We’ll know the masses are starting to trickle in when finally a mining stock or metals ETF makes it on to the top 100 most owned listed on Robinhood. So far this isn’t the case yet. I opened up a small account on Robinhood just to keep track of what the people are doing on there and to see what it is like to be a Robinhood trader for myself. I don’t really trade it (just have some things I am holding in it and don’t even look at) as I have more important accounts that I have to keep on top of. But this is what it has done.

As of now on Robinhood only 15,569 people own GDX. On their top 100 list the bottom stock at number 100 this morning is JNJ with 75,557 people owning it. The time will come when the masses start to get in and the opportunity is to get in AHEAD of them. As far as ETF’s go 38,162 of them own airline ETF JETS and 45,791 of them own dope ETF MJ. If these people would just get out of these bad lagging ETF’s and into GDX I believe they could win big.

I don’t really recommend Robinhood as a trading platform as it doesn’t have OTC stocks on it where there is now huge opportunities in the mining space, but if you are just starting out you can get a free share of stock from Robinhood by using this link to start an account with them.

If you are new to trading or want to simply learn more about my concepts grab my book Strategic Stock Trading available on Amazon by clicking here.

-Mike



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