by Adam Hamilton
Zeal LLC
Gold’s early-October plunge on futures speculators’ stop losses being run has naturally left this metal mired in battered technicals and bearish sentiment. But that sharp selloff has already accomplished its rebalancing mission. The excessive gold-futures trading positions that triggered that stop running have already reversed, and the investors fueling gold’s bull are starting to buy again. Gold is green lighting its next upleg.
Gold’s price action in recent years has been overwhelmingly dominated by just two groups of traders. Gold-futures speculators effectively control gold’s short-term behavior, as futures’ extreme inherent leverage gives their capital wildly-outsized influence. And investors, specifically American stock investors buying and selling shares in the flagship GLD SPDR Gold Shares gold ETF, have commanded gold’s longer-term moves.