-- Posted Monday, 7 June 2010 | | Source: GoldSeek.com

By Gene Arensberg       Esse quam videri – To be rather than to seem. 

But silver may be the “better” buy.

HOUSTON – In our Got Gold Report four weeks ago (May 9) we hauled out the caution flags because of the ominous signals then showing in the data, charts and ratios we follow closely here at GotGoldReport.com.  The subtitle of that report said, “Rig for heavy weather and hope we don’t get it.” 

Two weeks ago, in the last full Got Gold Report (May 23) we wondered then: …”whether we are about to enter the eye of the storm or the eye wall itself.” 

Since then the world has given us all a bad taste in the mouth, a heavy dose of anxiety, precious little to be bullish about and we all have seen even less from our political “leadership” which might cause even the hint of increased confidence in them.

About the only thing we have seen enough to be bullish about is gold – because it is now so darn easy to be bearish of most all fiat currencies longer term and even more bearish of the poorly chosen elitist, vote-pandering, freedom-stealing, Big Government-loving narcissist cast and crew currently in charge in Washington.     

As bad as that seems, we sense it is patently good for gold longer term, but everyone already knows what is in the news.  Let’s look at what some of the indicators are telling us.  First, here’s this week’s closing table: 

Looking at the table just above we see the gold hi-lo spread contracting, with the HUI running red.  We have to note the extremely high gold/silver ratio now near 70.  While gold turned in both a higher hi and lo, silver could not answer.  Short-term the table sends us a confused and more mixed up message than we like, but long-time readers know we view a GSR over 70 as an opportunity – more about that below. 

Longer term we still see nothing which undermines the secular bull market thesis for gold metal, so let’s drill down deeper into some of the signals and see what they might be saying.   

This Week’s Radar Screen  

The Got Gold Report – the full report – is published biweekly.  Between reports we communicate more regularly on the GGR web log, so it pays to stop by once in a while to catch the latest offerings. 

The purpose of the Radar Screen is to briefly summarize our positioning for the gold and silver markets, and also to highlight a few of the dozens of indicators, ratios and graphs we keep in constant touch with at Got Gold Report.  Long-time readers know we update most of the Got Gold Report linked charts each week, even the weekends when we don’t publish the full report.

For a little while longer, readers need only pull up the last full report (even this one) and click on the chart links on “off weeks” to see any updated comments.  Changes are almost always completed by 6:00 pm EDT on Sunday evening (except when Monday is a holiday) and occasionally during the week itself as events unfold.  The chart links are always at or near the bottom of the reports.  

Pretty soon now, however, all of the chart links will have to change as we have transitioned to our new permanent web home, which we are proud to say is up, functioning and gaining lots of new readership at www.GotGoldReport.com.

Like a Bird Dog on Point

Back to this week’s Radar Screen:  On Thursday, May 20, our stops were tripped and we hauled to the sidelines on gold.  The trade was double digit percentage profitable (12+%) but less than we had hoped for – this time. 

Gold

We plan to stay opportunistic for gold, waiting like patient Vultures for a juicy opportunity to redeploy our short-term trading ammo, glad that we hold long-term physical metal in our arsenal.  We will have more about our positioning in the linked charts below and likely on the web log later this coming week.  As we like to say, we are like a bird dog on point waiting for a re-entry sign. 

Moving along, here’s this week’s short-term trading chart for gold:

Gold bounced at the very top of the zone we thought might be former resistance morphing into current support, but it has so far not managed to get into our “wheelhouse” (the purple box target).  Demand has just been too strong, even in U.S. dollar terms.  As strong as it has been in greenbacks, it has been even stronger in terms of Euros.

We will continue to tentatively mark the high $1,150s as potential support for gold with resistance now near $1,250 – until proven otherwise on both counts.

Our preferred area of reentry remains well below the current trading, but with the gold/silver ratio ballooning up to near 70 this week, we are not yet willing to raise our short-term trading entry targets. 

Silver

Silver is a little different story as far as we are concerned.  COT action (see silver COT data below) does not suggest that the Big Sellers (BS) have been aggressive on the short side of the second most popular precious metal.  Despite some modest negative money flow from the largest silver ETF, we sense that demand for physical silver in bar form has ramped up considerably over the past two weeks.  We are privy to rumblings in the rumor mill of plans by “major players” to accumulate substantial amounts of the white metal – most likely through the COMEX in New York, but probably also in the London physical camp. 

This is not the first time such rumors have circulated.  We heard similar stories in April and again in May.  It is not the silver accumulation story that we are interested in so much as its longevity.  Rumors that don’t die are usually not just rumors.  

Please see the linked charts below for more information on silver this week. 

As usual, much of this week’s technical and market commentary is contained in comments inserted in the actual linked charts below, and we will be adding additional “intel” to the “blog” often going forward, so, on to other business, beginning with this week’s COT report.

Gold COT

The Commodities Futures Trading Commission (CFTC) issued its weekly commitments of traders (COT) Friday, June 4.  The report is for the close of trading as of Tuesday, June 1. 

GotGoldReport.com is focused on the changes in positioning of the largest futures traders in that report – the traders the CFTC classes as “commercial,” including the bullion banks, large dealers and swap dealers combined.  We refer to those commercial traders as “LCs” for “Large Commercials.”  

As gold ADDED $21.59 or 1.8% to $1,225.62 COT reporting Tues/Tues, COMEX commercial traders ACTUALLY REDUCED their combined collective net short positioning (LCNS) by a small 756 contracts or 0.3% from 268,379 to a still high 267,623 contracts net short as the open interest plunged by 37,410 contracts from a very high, near record 591,360 to 553,950 contracts open. 

So, as the number of open contracts was dropping largely and quickly, the LC’s were not really the ones doing the dropping, so to speak.  Nevertheless, when we see a decrease in the LCNS on a substantial increase for the price of the metal, we don’t normally view that as a bearish signal.  Had we seen an increase in the LCNS with the increase in the price of gold, it would have “seemed” normal.  What we got instead was the opposite – a little. 

Here's the nominal LCNS graph for gold futures (Graph1): 

Since Tuesday, gold met with dogged resistance in the upper $1,220s, but a very determined sell-down attempt on Friday, June 4, during the post non-farm payroll disappointment rush to liquidity – one which drove gold below $1,200 briefly, was met with equally determined bidding.  The sell-raid in the New York futures arena was reversed on high volume, turning the sellers into buyers for the rest of the skirmish.  Gold actually closed at $1,219.83, well above the Friday open near $1,207 despite briefly trading to $1,197.15 thanks to the short covering.     

Remember that the LC’s net short positioning barely changed even though the open interest plunged.  When compared to all contracts open, the relative commercial net short positioning (LCNS:TO -  the most important graph we track) therefore rose sharply from 45.4% to 48.3% of all COMEX contracts open. 

Here's the LCNS:TO graph for gold (Graph 2):

In last week’s COT Flash report (see the GGR web log for a copy), we said:  “Our antennae are up, we are on the sidelines with our short-term bullets and we are anxious.  Anxious not because of our long-term physical holdings, those give us comfort.  We are anxious because we sense something extraordinary is afoot, something potentially historic … and while we do not want to miss out on a potential major move, our instinct is to be cautious when our indicators perform in unusual ways.”    

Well, since last week’s report gold is $21 higher, the LCNS is a little lower, but the open interest had dropped considerably.  As of Thursday the open interest had fallen a bit more to around 548,000 contracts, meaning there is more bull-side “horsepower” potentially than there was a week ago. The flip side of that gold coin is that it also means some of the buy-side has pulled in their bets.    

We don’t like being on the sidelines with our short-term ammo on gold, but since we believe gold is in a long-term secular bull market and more likely to surprise to the upside than the opposite, we have but three possible positions.  Long, leveraged long or flat – never short in a bull market (except to hedge).  Thus, our current stance of waiting patiently for opportunity with gold for our short-term ammunition.  

If gold bears were hoping to see the LCs aggressively on the short side in New York futures, they will have to wait at least until next week’s COT report, but we kind of doubt they will see what they want then either.  We’ll see.     

The above is an excerpt of the full Got Gold Report update.  To continue reading please click on this link: 

And thank you for doing so. 

Disclosure: The above contains opinion and commentary of the author.  Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure:  The author and/or his family currently holds a long position in SPDR Gold Shares, net long  iShares Silver Trust, long the following “Vulture Bargain Hunter Stocks” mentioned in this report or within the last year: Timberline Resources (TLR), Paragon Minerals (PGR.V), Forum Uranium (FDC.V), Odyssey Resources (ODX.V), Terraco Gold (TEN.V), Hathor Uranium (HAT.V),  Gold Port Resources (GPO.V), Bravo Venture (BVG.V), Millrock Resources (MRO.V), Atna Resources (ATN.T), Riverstone Resources (RVS.V), Constantine Metal Resources (CEM.V), Canadian Shield Resources (EXP.V), Rye Patch Minerals (RPM.V) and currently holds various other long and short positions in mining and exploration companies. The author receives no compensation from any company mentioned in this report with the following exceptions:  Canadian Shield is a sponsor of www.gotgoldreport.com.   To contact Gene use LLCCMAN (at) AOL (dotcom).  

A land developer, professional numismatist, self-taught bullion trader and investor since 1980, Gene Arensberg analyzes technical and fundamental developments in the precious metals markets.  In 2000 Gene started sharing his own market research with fellow traders and fund managers.  Those email reports evolved into his popular Got Gold Report, a biweekly look at important indicators for gold and silver published on the web. Gene’s more in-depth market reports, insights and trading ideas are available at www.GotGoldReport.com. 

-- Posted Monday, 7 June 2010 | Digg This Article | Source: GoldSeek.com

Previous Articles

© 1995 - 2019

Live GoldSeek Visitor Map | Disclaimer