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Thursday, November 15th, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Little Guys Buying Gold

By Brad Zigler

Real-time Monetary Inflation (last 12 months): 1.4%

Small speculators are big gold buyers now. Well, in truth, they have been big buyers for the past three weeks.

Net long positions held by small specs have notched new highs in the last three weekly Commitments of Traders reports published by the Commodity Futures Trading Commission.

Now, some traders would look at this and figure it’s time to sell. It seems that money managers took to that notion last week. While small specs were buying, money managers were liquidating their long positions. Not aggressively, mind you, but enough to drop gold’s net speculative length by 20 basis points (0.2 percent).

So, whose lead do you follow if you’re a gold investor?

Well, if you correlate the week-by-week changes in gold’s price and investor bullishness, you’ve got to give the nod to the money managers.

Money Managers’ Gold Bullishness

Money Managers’ Gold Bullishness

Over the past five years, the correlation between gold’s price and the strength of funds’ bullish positions has been 68 percent. Not perfect, certainly, but well beyond randomness.

And the little guys? How’ve they fared?

Their correlation’s been -0.6 percent. Practically nada. Zip. Zilch. Bupkes.

Small Speculators’ Gold Bullishness

Small Speculators’ Gold Bullishness

Small traders have been more fractious than the momentum-following money runners. Being lightly capitalized, the little guys probably haven’t had the staying power to ride out gold’s volatility either. Especially when margin rates are raised.

All told, you’d get a better shot at gold profits if you followed the big guys’ lead week-to-week.

Last week, they were sellers. Place your bets accordingly.

The original article is published at http://seekingalpha.com


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