Managers Increasing Bets on Gold But Price Action Looks Bearish

Chart 4: Managers increasing bets on Gold but the price looks bearish!

Gold COT 

Source: Short Side of Long

Finally, we turn out attention to the precious metals sector. I believe that the long term secular bull market in this sector is not yet finished, especially the way central banks continue to act with currency devaluations. However, we need to respect the price action right now, which shows that we are currently in a cyclical bear market that was way overdue after Gold recorded 11 annual gains in the row.

In my view, as I have written many times on the blog, Gold will be breaking down into a final low soon enough. The up-and-coming selling pressure will most likely produce a proper panic which we failed to see in middle of 2013. The shake out should get rid of majority of perma-bulls, which refuse to give up on their optimistic Gold views. This is precisely why I have fully hedged my Silver holdings in early July (above $21), as well as executed short positions on Gold (above $1310).

While Silver has recently broken below its important support level at $19, Gold continues to hang in there (for now). However, I think this is soon about to change and Gold will follow Silver downward by breaking below $1,185. Hedge funds have recently been adding to Gold once again, but the price pattern remains quite bearish in my opinion.

Chart 5: Positioning in the Silver market is now becoming very negative

Silver COT 

Source: Short Side of Long