Gold: Learn from the Actions of the “Smartest on Wall Street”
Deep-pocketed speculators miss the big turns – but you don’t have to
by Bob Stokes
Updated: February 25, 2020
Hedge fund managers are considered to be among the smartest people on Wall Street.
Ironically, as a group, they're notorious for consistently being on the wrong side of major turns in the markets they trade. By contrast, a group of insiders called Commercials are generally on the right side of major market turns.
With that in mind, consider this commentary from the August 2015 Elliott Wave Financial Forecast, and note on the chart that hedge managers are synonymous with the term Large Speculators:
Large Speculators and Commercials hold a net-position size that is a multi-year extreme, and it is opposite to the position size held several weeks prior to gold's all-time high at $1921.50 in September 2011 and at gold's peak in October 2012... a sentiment that is consistent with a gold rally. Despite the possibility of near-term base-building, we still anticipate that the advance, when it starts, will last several months.
Indeed, in December 2015, gold hit a low of $1046.20 and then rallied to $1375.53 on July 6, 2016, a 31% increase.
A reversal followed which sent the price of gold to a Dec. 15, 2016 low of $1122.98.
At that time, as you might have guessed, sentiment had again turned decidedly bearish.
Here's a Dec. 29, 2016 Marketwatch headline:
2017 is the year gold drops below $1,000
Instead, however, gold started another climb. By Jan. 25, 2018, the price hit $1366.38, and the Daily Sentiment reading from trade-futures.com registered 91% bullish.
But, yet again, most big players were on the wrong side as gold began another slide.
By Aug. 16, 2018, gold hit a low of $1160.24. After the market closed on that date, our U.S. Short Term Update said:
Large Specs currently [hold] their second smallest net-long positions in 16 years at 3.5%.
In other words, 96.5% of deep-pocketed speculators were betting that gold's price would continue to decline.
But, if you've been an observer of the gold market, you know that the price of gold has not looked back since then.
Here in late February 2020, our Financial Forecast Service provides you with a very important update on the behavior of Large Speculators versus Commercials.
Learn what our analysts expect next for gold without any obligation. Click on the link below to get started now.
This Group of Traders is Usually Right!
Yes, there is such a group … and they have a way of consistently “buying low and selling high.”
This group is the “commercials,” and they work very differently from the herd of speculators.
A classic Elliott Wave Theorist explains why they usually succeed in the markets they trade:
Commercials are in the business of manufacturing, not speculating, so they think economically rather than financially. They do not perceive commodities as investment items, so they’re not participating in the herd. They perceive them as economic goods, so they search out bargains just as a consumer does in the store. They want to buy commodities cheaply, not to re-sell to a greater fool but so that their company can use them profitably to manufacture retail goods. In short, the commercials are consumers of commodities, not investors in them. As a result, they are comfortable taking the other side of a trade from speculators at market extremes.
Learn what our flagship Financial Forecast Service reveals about the most recent activity of “commercials” -- with no obligation for an entire 30 days.
Simply follow the link below.
Forget the Fed -- Watch the Waves
The Federal Reserve, and to a lesser degree the European Central Bank, have dominated the conversation about interest rates lately. But watch our Interest Rates Pro Service analyst Ivo Zhelev apply textbook Elliott waves to forecast the price of the UK's Long Gilt -- and, by extension, UK interest rates -- without a single glance at central bank statements.
Why a U.S. Recession May Foil Economists’ Expectations
A recent survey reveals positive expectations for the economy by a group of "professional forecasters." Learn why you may not want to bet the farm on that expectation. This chart compares leading economic indicators around the time of past recessions with what's going on now.
Gold Mining Stocks Lead Gold Lower: What’s “Fundamentals” Got to Do with It?
In mid-April, gold mining stocks led by VANECK GOLD MINERS ETF turned down from one-year highs to 3-month lows in May. Gold followed, reversing from all-time highs on May 4 to multi-month lows on May 25. We don't need another "fundamental" explanation for why.
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