Dear Friends,

The following chart details the Commitment of Traders report released today (Friday) which covers the market involvement of the players through Tuesday of this week.

Note that the heavy blue line, which details the NET position of the Managed Money crowd, has been steadily ramping up their purchases of gold futures. At the risk of being redundant, it is this flow of funds from the managed money side of things which drives markets today. It is therefore a sign of a healthy market that interest continues to build in gold. As long as that buying continues, gold will be propelled higher, bullion bank selling notwithstanding.

Looking into the actual numbers, the total number of long side contracts being held by the Managed Money crowd is currently 24,400 off its recent peak in October of last year. The other large reportables, big locals, individual traders and CTA’s, are currently 9,000 contracts or so shy of their maximum number of longs made that same month. The small specs, the public, are approximately 12,000 contracts shy of their peak long side exposure also made that month. In total, there is a room for an additional new 45,000 longs to be added before we reach the peak that marked the move over $1200.

Even at that, there is nothing that says gold long side exposure will reach those levels and then as if by some mandate, cannot surpass that level and continue to go on to make yet another new peak. It all depends on what investor psychology is at the time and how strongly players feel about the future prospects of gold.

By the way, this is the highest weekly close that the front month gold contract has ever made. Note that I said, WEEKLY CLOSE.

That is interesting because it is occurring when as stated above, the long side guys are below their maximum exposure. It is not a stretch of incredulity to state that the potential exists for a push through the peak price in gold without the market being overextended to the long side.

Click chart to enlarge today’s COT chart in PDF format with commentary from Trader Dan Norcini ^[1]

Click chart to enlarge today’s Weekly HUI chart in PDF format with commentary from Trader Dan Norcini ^[2]

Click charts to enlarge today’s Monthly Gold chart in PDF format with commentary from Trader Dan Norcini

^[3]

^[3]