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Posted by on Feb 29, 2016 in Market Insight

Expecting Higher Gold Prices

Expecting Higher Gold Prices

February 29, 2016

Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.

Commodity prices are a bit weaker and as is the case so often these days we can attribute the weakness of the commodities markets to the general strength of the US dollar. Given that the dollar’s risen by more than 1% against a number of currencies it is reasonable to expect the commodities markets to be weaker also and indeed they are.

We wish at this point to delve into the weekly CFTC Commitment of Trader’s Report that was released on Friday for these weekly reports do give us warnings or insights into the changing composition of ownership of the various “commodities” traded.

For example, speculators in gold increased their net long position by a very material 30,350 contracts as of the 23rd of February, the equivalent of 3.1% of open interest. Having been barely long at all in very late ’15, the “specs” have taken their long positions back to levels that appear to us to be vulnerable to selling.  Having been rather aggressively long of gold on our own, this swift and material increase in long positions by the “specs” gives us very real pause.

Gold fell on Friday as the same “malevolent” forces that have been at work on Friday’s all-too-often these days was as work again on Friday. Having gotten quite extended to the upside, gold’ price may need a day or two or three of consolidation… for correction… and nothing more. As one might have reasonably expected $1250/oz. has proven to be a formidable resistance where strange things happen and strange “brews” are brewed.