Commercials Reduce Gold Shorts

SHORT POSITIONS

Y-Charts shows managed money short positions at a record 153,108 contracts. In contrast, they were short just 100,397 contracts last July when gold bottomed and rallied $150 in 8-weeks. They were short 110,836 contracts in December 2015 when gold bottomed at $1,045. A sharp turn in gold could ignite a short-covering feeding frenzy.

GOLD DAILY 

Gold is 52-days into a cycle that has been averaging about 55-days. Prices may have bottomed Friday. Closing above the 10-day EMA early next week will support this view. Otherwise, we will likely see a couple more down days before setting a low next week.

SILVER WEEKLY 

Technically, prices closed lower for the 8th consecutive week. A Doji cross formed. Prices managed to hold the $15.18 low.

SILVER DAILY 

Prices formed a bullish engulfing pattern. Closing progressively above the 10-day EMA early next week will support a bottom. If prices didn’t bottom at $15.18, then they should reach a low next week with gold.

GDX 

Unfortunately, the miners failed to sustain Friday’s rally. Prices need to close above Friday’s high ($21.32) to recommend a bottom. Failing to do so early next week could lead to another drop. I think gold is very close to a low (if it didn’t bottom on Friday), so any additional weakness in miners should be temporary (3-5 days).

GDXJ 

There was a bad tick in GDXJ, prices didn’t rally to $32.91 on Friday. If gold postpones its bottom until next week, the bears may try to push juniors down to the lower support level around $30.50. Otherwise, GDXJ would have to close progressively above the 10-day EMA to establish a bottom.

JNUG 

Attempting to exit and re-enter at lower prices sounds good but is extremely difficult to do in real time. If you exit and prices rally – now you’re chasing prices. If you exit…miss the bottom and prices explode higher – again you're chasing. When the bottom comes, I suspect prices will reverse sharply. If gold hasn’t bottomed, it should be very close (3-5 days). If JNUG dips a little further, I’ll use some of my dry powder to buy another tranche (fourth and final).

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