COT Gold Charts 2.0, page-37

Looking at the Gold Futures action during July I found several bullish indicators. Here is a quick summary of the bullish indicators IMHO, but DYOR blah blah

1. Gold futures shorts by the Speculators reached extreme levels in July. More comment on this further below.
2. Short interest in SPY (S&P500 ETF) hit it's lowest level since May 2007
3. GLD's entire pre USA election holdings build up was unwound during July. In the last week of July the drawdown saw the gold holding drop to 791.9t, their lowest since March 2016. This is bullish for gold as it might indicate that investors are under invested in portfolio diversification terms. This sets up massive buying fire power when sentiment returns.

Regarding the extreme level of shorts by the Specs:

1. It reached the 6th highest level of Spec shorting since early 1999 at 189,200 contracts. The top 4 highest levels were all around the 200k mark and bunched in the time period of August 2015. The 5th highest was in December 2015 and we all know how the POG took off in early 2016.

2. Short selling by the Specs was rampant over the first 2 weeks of July. It saw 55.1k contracts short sold over that 2 week period and according to some analyst reports was the 2nd biggest blitz ever witnessed over that time frame. However, the POG only fell by 2.6% with the Specs dumping the equivalent of 236.2t into the Futures market versus the Global gold investment demand that averages only 30.7t per week (according to the World Gold Council).

3. On the 19/7 there was more strong shorting by the Specs but the POG barely fell. This might have been some last gasp downside probing and if so indicates that the Specs are getting near to selling exhaustion.

4. On the 25/7 the Specs started to cover with the overall short contracts plunging 27.4k contracts. This is the 5th largest daily offset since 1999 according to one analyst report I read recently. Notwithstanding this drop the total Spec shorts remained super high.

So what does this mean to me??........... it looks bullish for POG going forward. The Spec shorting has stopped growing and there is potential for a short squeeze in the Gold Futures market. Look at the VIX for indications of the fear factor returning and any sell off in USA equities will send the Specs running to cover their gold shorts. That will boost the POG. Plenty of GLD investors are sitting their money on the sidelines and any short squeeze causing the POG to rise will likely see them jumping back into the GLD. That will be a big potential turnaround in the general sentiment for gold.

Don't hold your breath as time will tell......... but place your bets according to your risk profile as the gold miners will get a big bump if and when positive sentiment returns.

Cheers