Headline Fear Hides Gold’s Bullish Money Flows

Connected interests (commercial traders) have not only covered their short position but also increased their long positions dramatically since early August. Commercial traders’ longs positions as a percentage of open interest has increases from 29.8% to 35.2% over the past six weeks. This trend and reading, second highest of 2011, set a bullish tone for gold despite growing fears induced by the recent technical consolidation.

Commerical traders’ highest long allocation for 2011 has been 35.5%. This reading, registered on 5/17 when gold was trading at $1478.50, preceded a sharp rally. It’s also important to note that the level of short-side participation is much smaller today than 5/17. In other words, today’s bullish setup has the potential to be far-more explosive.

Gold London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Long & Short As A % of Open Interest