IS GOLD VULNERABLE TO ANOTHER SHAKEOUT? / MACLEOD FINANCE

 Is gold vulnerable to another shakeout?

The COT figures show that last Tuesday hedge funds were net long 180,375 contracts. The question is how solid are these holders, and what are the seasonal factors?

ALASDAIR MACLEOD

The chart below shows how Comex’s Managed Money category drives the gold price, and has been doing so, particularly since 2021:

This is normal market behaviour. 

But in all bull markets, there are times when the hedge funds are a little too enthusiastic. 

Could this be one of them?

My next chart indicates the Managed Money’s current group sentiment:

For reference, the pecked line shows the average net long position since 2006, about 110,000 contracts. 

I would call that neutral and pencil in the 200,000 level as indicating overbought conditions for this category. 

In conclusion, Managed Money is not overbought, but there may be some room for the Swaps (mainly bullion bank traders) to shake out some of the weaker hedge fund speculators when circumstances allow.

This is the current mark-to-market position of the Swaps:

Things are going the wrong way for them, and they are certain to pounce on any opportunity to shake out flaky longs.

In short, an absence of meaningful economic news (and to a lesser extent perhaps geopolitical factors) ahead of the new presidency is conducive to sideways action — which is what we are seeing. 

This makes gold vulnerable to bear raids from the Swaps. 

And keep in mind that bullion bank traders will wish to see lower gold and silver prices for their year-end valuations, an important factor for calculating annual bonuses.

This point having been made, seasonality alone suggests there will be higher prices in the New Year. 

And in the past, this has sometimes led to gold bottoming out in mid-December. 

But if this coming week sees the price dipping from here as the Swaps play their games, stackers should rejoice in a Christmas bonus ahead of a positive 2025 — for gold that is.