In recent “Charts of the Day”, we highlighted gold and silver. Neither metal would normally be on our radar because they’ve both been weak since earlier this year. However, the precious metals, given their almost singular ability to rally while all other assets are in decline, are always on our watch list for opportunity. Over the last few weeks, silver has registered significant money flow from our Buying Power Indicator.
Last week, gold showed strong buying power as well while at the same time, smaller players are leaving the space aggressively. In the weekly COT Report (from the CFTC), the “non-reportable” traders are ones whose positions are so small that the CFTC does not want to bother tracking them individually.
On Tuesday, Tom McClellan produced this chart of gold timed by the “non-reportable” traders saying…”They are the hot money. Last week, when gold was bottoming, they were puking.”
The contrarian that still lingers inside of me, plus the chart set up and the technical observation that traders are “puking” gold, continues to suggest gold (and silver) are likely turning higher. Last week we added Wheaton Precious Minerals (WPM, TSX) and the iShares Basic Materials Index (XMA,TSX: 70% precious metals).
Peter Schenk, CMT