Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
Gold started the new year on a happy note. It jumped up to a five month high…and it’s near a key moving average as some safe haven buying began.
This rise spilled over to silver and gold shares. And all three are looking better.
The big question on all gold investors’ minds is: Are the lows in the bear market behind us? Also, was the November low at $1140 THE low?
– Only time will tell, but the strong start this year gives us the feeling that the lows are in.
– Gold, however, is not out of the woods just yet, and we need to stay cautious.
For now, if gold’s firmness since November continues, and gold stays above $1265 (the 65 week moving average), it’ll be turning bullish, reinforcing that a further decline is unlikely. Gold would then turn super bullish if it can manage to rise and stay above $1300, its mega moving average (see Chart 1).
Currently, the verdict is still out, and we need to see more development over the next few weeks.
As you know, gold shares have been the weakest in the metals sector for the past couple of years. But they’ve also been extremely oversold and bombed out (see Chart 2).
As the new year began, however, the HUI gold share index has been rebounding.
It’s now at a four month high…and if it can rise and stay above 213, it’ll be turning bullish and very strong.
So is gold leading the way for gold shares and silver? That could be, but silver is still lagging behind gold and the shares somewhat.
Since silver is also an industrial metal, it’s being held back by the weak copper and oil prices, and it needs to prove itself. But silver will be fine by staying above its November lows at $15.
There’s no question, the metals sector is looking a lot better, but we recommend waiting to see if they can prove themselves before jumping in head first.
Long-term investors, however, may want to go ahead and accumulate physical gold and silver at current levels.
Visit us at the Aden Forecast.
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