Chart 1: It’s amazing how fast funds have returned to Gold & Silver…
Source: Short Side of Long
I am amazed at what I would call an extraordinary reversal in sentiment and hedge fund positioning within the Precious Metals sector. If we refer to Chart 1 & 2 above, we can see that hedge funds (dumb money) have piled into Gold and Silver at incredibly rapid rate. In particular, the build up of contracts in Silver is astonishing.
Now, this doesn’t necessary mean the rally is done. For all I know, it might continue for longer. However, prices have still failed to post a higher high, which would signal a return to an uptrend. So the fact that bullishness has been rising at each intermediate lower high, has made me uncomfortable as a contrarian investor.
To prove the bullish trend, Gold and Silver have to push higher despite dumb money piling in. Gold needs to overcome a resistance at $1,400 and Silver at $22. Keep a close eye on these two metals in coming weeks.
Chart 2: … and contracts rise despite prices still posting lower highs!
Source: Short Side of Long
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