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Gold Futures Trading Signaling a Bullish Rally for the Fall
In Adam Hamilton’s latest article he explains why gold has been so deeply out of favor this summer. Hamilton explains to readers that gold’s ‘sentiment wasteland’ is driving traders to flee the wholesale market, specifically the futures traders. As negative as this may sound, Hamilton explains that it is in fact a bullish omen.
Hamilton explains that after his years of reviewing the Commodity Futures Trading Commission’s Commitments of Traders (CoT), he has noticed a very bullish pattern developing for gold. While it is a contrarian stance, Hamilton backs it up with years of analysis proving his theory.
He states that “When futures traders are the most bearish or apathetic about gold, giving up on it, is exactly when this metal is transitioning from correction or consolidation to upleg mode.”
When futures traders stop supporting the gold market (due to a prolonged period of lackluster action) it has proven to be the most bullish time to buy.
He comments “While futures traders have driven a slight uptick since, open interest is still very low relative to recent years. And this very phenomenon has proven wildly bullish throughout gold’s entire secular bull.”
In fact, Hamilton explains that futures traders activity in the gold market is nearly as low as it was near the end of the 2008 crash - right before gold went on an historic run from $700 an ounce to $1400. From his research dating back to 2001, he notes that futures traders have given up on gold at exactly the wrong time. He shows examples of their monumental poor timing in 2003, 2005, 2007, 2008, 2009 , 2010 and 2011.
Hamilton states “But out of these summer-doldrums lows likely in late July or early August, gold’s big seasonal autumn rally launches. Traders who can fight the crowd and buy low in late summer when everyone else has given up usually win big gains in gold’s following strong season. And when other indicators like gold-futures open interest are also bullish at this same time frame, gold’s odds for a large rally balloon.”
Click here to read the entire article from Adam Hamilton.