After holding onto huge, unprofitable long positions for months, gold and silver futures speculators are finally giving up and bailing out, while commercial traders (who take the opposite side of these trades, since every long requires an offsetting short) are closing out their shorts at a near-record pace.
Here’s the gold data for last week, courtesy of GoldSeek. Note the massive shift by speculators from long to short. They’re not in balance yet (where longs and shorts are equal) but they’re heading that way fast.
In silver, they’re just about in balance, which is historically about as far they usually go:
Here’s the same data for gold in graphical form with the silver bars representing speculator longs and the red showing commercial shorts. Note the long plateau followed by a rush to the middle, which is where rallies tend to begin.
One more week like the last two would put this indicator in screaming buy territory, but even if this is as far as it goes it’s still positive for January – which is a seasonally strong time for precious metals in any event.
For individual speculators, that means the junior miners are – again based on this one indicator – pretty good trades for the next few months.