Thursday, February 21, 2013

Gold Futures and Managed Money

I came across some information earlier this evening that appears to be not only interesting, but may also provide a decent clue that gold is not likely to trade much, if any, lower.

The link above will take you to the full discussion and I wish all credit to be given this author, Mr. Arensberg and his GGR - Got Gold Report, from which I have shared the chart below.

What follows is one of his excellent charts from his publication dated a few days ago - February 18th. It details the weekly net Managed Money COT gold position (blue) as well as the price movement of gold futures since 2008 (maroon).

I encourage you to read his report if you are interested in either the current positioning of the various powers within the Commitment of Traders report (COT) or if you are specifically interested in the widely touted notion that hedge funds are abandoning their gold investment positions.

My interest in this chart, to be honest, is to assess how smart these hedge funds are. I have drawn 5 light blue arrows to locations in the past 7 years when the positioning of Managed Money was heavily short. At present you may notice that they are more short of gold than anytime since 2008.

Anyway, I am very impressed with their trading. They have managed to consistently telephone the  exact bottoms of gold's enormous up legs.

OK. One more check mark in the box for the patient bulls.  :-)

You know, when those smart floor traders start to see these hedge funds running to cover these shorts it could get really exciting. I mean, these boys all play for blood and nothing appeals more to them than taking care of a wounded animal with a proper feast for themselves.

Tisk, tisk for the hedgies and their brilliant leaders.


  1. John, I notice that when you are in a time period when you are able to post your work on the TSITrader, I open my computer and go straight to your site. I heartily thank you for sharing.


  2. Joe - thank you. I never tire of hearing a word of appreciation.
    I would like to answer your excellent question about cycles when
    I have the proper time to consolidate my thoughts. But in short,
    I will continue to believe in cycles and the list of possible
    explanations for the recent aberration was three, but now reduced
    to two. Thank you again for your encouragement.

    1. Thanks Joe, I really appreciated your posts. I'm afraid been from another country, sometimes my limited English doesn't allow me to understand if you're words are
      cynical about the hedge fund managers? Thanks,

    2. Great work John......thanks.....

  3. John,
    Is 2008 an anomaly ?
    Look at the extreme divergence futures vs positions for that point.
    What say we have a replication of that scenario now.
    Implications .....more extreme short positions/lower futures pricing.
    In short ...todays "extreme" short positions on the chart should in no way predict bottoming.
    2008-2010 represent points taken in a Major C-Wave advance where tops(shorts) coincide with bottoms(futures). The 2012/13 points are taken during a B-Wave yet .....incomplete ?

  4. Liquid Motion - I do indeed love details and viewing them as creatively and
    skillfully as possible. But sometimes, once in a while, the details that are
    seen and known do not fit together such that one can absolutely depend on their that particular observation time. Of course, hindsight is always
    best for what explaining what, at the time, appeared as an uncertainty.

    A couple of thoughts regarding the data on the chart. The author of this chart
    explains things in greater detail than I. For example, he points out that
    while the 'Managed Funds' COT is extremely large short position at this time,
    curiously, they have not reduced their sizable long position. In this light, one
    can surmise that the 'Managed Funds' are really NOT all that bearish. Rather,
    they are just trying to hedge their long of some sort in
    case the sky really does start falling. The unusual problem that they now have,
    according the the author, is that the commercials are net barely the
    same time that they have a large short position. Obviously this unfortunate 'Managed
    Money' position may become dynamite as the commercials really don't have much if
    any short covering to do themselves. Rather, they are correctly positioned for gold's
    next large advance and the 'Managed Money' guys are going to pay a huge price when
    they decide to cover.

    The author also points out that while 'Managed Money' has built this large short position
    in gold, they have not done anything of the kind with silver. Therefore, another clue
    that they are more bullish than bearish on precious metals but stuck with a peculiar
    position when gold turns.

  5. So, what is being said is that Silver may get outrun by Gold when the 'turn' comes?

    1. It could be THEY were reluctant to short more silver since they can't expect central banks to bail them out - no silver reserve to lease from central banks.

  6. Anon - I do not think that is being implied or stated whatsoever.

  7. Prior extreme in 2008 was not the exact bottom. A bottom prior to the final bottom.

  8. If Soros thinks gold has had it, why does this encourage you gold bugs? Soros is about to short the British LB again, if he hasn't already done so.

    Just to add a thought, didn't gold violate the death cross recently? Nothing goes up/down forever, I was a CTA the last time gold hit rock bottom in the late '70's was it? Even half way down to rock bottom will bury most of the gold lovers around today, take heed.

  9. ProfoundlyWiseManNot - that is a clever profile name. Surely it does not explain why your website by the same name is blank?

    I have not written about Soros, so it is curious that you bring his name into this conversation about Managed Money and the COT.

    The allegations you make that he thinks gold has had it and that he is about to short the British "LB" again are based on what particular fact set, I wonder?

    That he recently liquidated a large portion of his holdings in the GLD ETF is evidence enough for you? Or that he initially became a billionaire by shorting the British Pound a long time ago means he is now going to do it again in grand fashion?

    Surely you have much better evidence than that which is obvious for all to see. Or do you?

    I would think a shrewd man like Soros would not be so stupid as to telegraph his trades for all to see. Much more likely is the notion that his trades work better when he succeeds in pointing the elephants in the direction of the quick sand.

    The death cross in gold charts you mention has only mythical capabilities. Perhaps you should do a little research on how well death crosses have fared in gold's recent history.

    That you were a CTA (commodity trading advisor) in the '70's is potentially meaningful - depending whether you were sage or sage Not at that time 40 years ago. Well, I take that back. It probably does not matter.

    I do absolutely agree that gold lovers are buried (demoralized and lose their long positions) when gold goes through a sustained and painful correction period. Take heed, indeed.

  10. John, you're too thin skinned t/b in this business. Besides, where I come from, you respect your elders. Unless the lemmings in here agree with your narrow views, you then choose to ridicule & put words in these mouths. You claim some technical ability, well I've been a technical trader/investor since 1969, & culminated a nearly 20yr. Wall St. career in 1988. Opinions don't matter, results do!

    SageNot rests!

  11. SageNot - you did not answer a single one of my questions. Perhaps your views
    are too narrow or thin skinned to hold water?

    You know, there are so many overpaid morons on Wall Street and in that general line
    of work that that particular resume simply does not impress me. Most of those overpaid
    folks have not made a contribution to society worth anything near what they were
    payed - but they had the BS to match their business card.

    If you make a point that can be substantiated, even if I do not agree with it, that's
    fine. It's a difference of perspective and values. But if you make grandiose statements
    to incite a particular emotional response and they are proven to be from a bag of wind,
    do not expect me to just go along because of your job resume or old age.

  12. Mercy! Sounds like a couple of politicians trading jabs here. I do think that John has made his trading record public and it appears that he has done quite well for a little ole school teacher from somewhere in Texas. I wonder if Sage would do the same.

  13. Well the blees of 99 is a great start building a bottom.
    Soros? he is lagging news and very diseptive. He well could have been one of the ones selling on the FOMC meeting. I would not be supprised if hear that he bought again

  14. woody allen quote from the sleeper. " I am a financial adviser. I help people invest their money until its all gone"
    hope that is right. if not its close

  15. SageNot says "too thin skinned t/b in this business". Really? I translate that to "U r 2 thin skinned 2 b n this biznis n u will lose all ur money's". Not the words of any Sage nor Elder.

    And if you really knew anything about respecting elders, you would not have used a picture of your grandpa or whoever your 'avatar' is. Keep your trap shut unless you have something of value to contribute and/or come back when you turn 30.


  16. John, Thank you for your insights and all the supporting data you publish. You have kept me calm and reflective during this period of PM
    adjustment. I look forward to your thoughts and
    support data as I know it will serve me well.
    Thank you for being there! Just another 'lil
    fish in the sea. Carmp

  17. Let's not forget that Soros was selling PAPER gold, which is not representative of the TMV of physical gold (or silver). He also may have been short covering in FX (Euro). To me, charts and Elliot Wave etc. MAY provide hints as to how PAPER gold may go but, in these extreme and unusual times, with coordinated Central Bank manipulation, Plunge Protection Team(s, JP Morgan, HSBC manipulation etc.,NOTHING is as it appears,EVERYTHING is manipulated and the pumping of FIAT into the market has created false perception and value. Is anything really better today? Is it not in the best interest of the FED to force the metals down to give the appearance of a strong US dollar? Have the fundamentals changed? I think not. I maintain that metals will continue up overall sometimes in spectacular surges in reaction to events only predicted now, but coming none the less. Buy physical on the dip and hold fast.

  18. John, in appreciation of all the great work you share, I compiled this chart:

    As you can see the chart reflects the price development of a basket with precious metals and US-bonds. The idea is a system with monthly rotations to the best performing asset in the basket. The benchmark in this case is a 30-period ROC of the 5-period sma of price.

    Results are quite nice as the are, but I think it would be quite interesting to see if performance can be boosted by replacing ROC for TSI. I just haven't had the time to get it done and besides I know you are more than able to adapt the script by yourselves :-)

    Of course you could create any other basket to your liking.

    Thanks and enjoy!