Tags: McClellan | gold | short | traders

Big Gold Traders May Be Cashing Out of Their Short Positions

By    |   Tuesday, 10 December 2013 07:35 AM

Commercial gold traders have slashed their short positions against the precious metal so far that it suggests gold prices may be at a price bottom, according to the McClellan Market Report.

The last time commercial traders' short position hit such a low point was last June, and prices ticked up from there.

Commercial traders are generally hedgers, exporters and importers who use futures contracts for hedging purposes, i.e. to reduce the risk of financial loss due to a change in gold's price.

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"One of the big fears that is voiced about gold is that the presumptive end to QE [quantitative easing] will be bad for gold prices because the Fed will stop printing excess money," said Tom McClellan in his newsletter. "But what those voices seem to forget is that QE has not been all that helpful to gold over the past couple of years.

McClellan noted that gold hit a high of $1,900 per ounce in 2011 when the Fed's balance sheet was smaller than it is today, and that all of the QE spending since then has not stopped gold from falling even more.

"So if the end of QE is really a bad factor for gold, then why was the continuation of QE since 2011 not helpful for gold?" he wondered.

McClellan derived his data from the weekly Commitment of Traders report supplied by the Commodity Futures Trading Commission.

He concluded the ongoing decline in gold prices has led commercial traders to trim their collective short position, either because they want to hedge less of their future production, or because they see a bullish outcome on gold from here.

Analysts believe gold prices will remain bottled up until the end of the year while investors await a clearer idea of when the Fed will taper its massive asset purchases under QE, CNBC reported.

"Gold is holding its own for now because the jobs report was not good enough to end the tapering timetable guessing game," Ed Moy, chief strategist with gold-backed IRA provider Morgan Gold and a Moneynews contributor, told CNBC.

Scott Carter, CEO of Lear Capital, said he is keeping a "neutral" position on gold for the week ahead.

"We may need to clear the holidays, establish [Janet] Yellen as the new Fed chair and see where that takes us," Carter said. "The picture will be clearer in mid-January. I think the trend line is net bullish for gold given debt, QE and a weak economy."

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Commercial gold traders have slashed their short positions against the precious metal so far that it suggests gold prices may be at a price bottom, according to the McClellan Market Report.
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Tuesday, 10 December 2013 07:35 AM
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