by Steve Saville, The Speculative Investor
Some commentators have been anticipating a “commercial signal failure” in the gold market for more than 15 years. Moreover, whenever the gold price experiences a large rally the same commentators routinely cite the potential for a commercial signal failure (CSF) as a reason to maintain a full position, the argument being that the coming CSF is bound to result in massive additional price gains. The reality, however, is that whereas a CSF is an extremely unlikely event in any commodity market, in the gold market it is an impossibility.
A CSF theoretically becomes possible in a commodity market after the price has been trending upward for some time, and speculators, as a group, have built-up an unusually-large net-long position in the commodity futures.