Highly Hated, but That Seems The Start of The Next Great Bull Market in Gold

The comments below are an edited and abridged synopsis of an article by Rajesh J. Shah

Shah likes to buy what’s cheap, hated and at the start of an uptrend. This strategy works for just about every type of asset.

Some like to define ‘hated’ by using surveys of investors, and that works. For example, in the latest Bank of America Merrill Lynch Fund Manager Survey, gold sentiment hit a 17-year low among investors. That shows us investors are pessimistic about gold.

Highly Hated That Seems Start of Next Great Bull Market in Gold | BullionBuzz

However, it is what investors are doing that matters most. Surveys are good, but Shah prefers to look at real money.

The best way to see what real money is doing in gold is to look at what large speculators in the futures markets are doing with their money. For that, Shah look at the Commitment of Traders (COT) report. It shows the real-money bets of futures traders.

Importantly, when these speculators are crowded at one side of a trade, the opposite tends to happen.

Most people look at the size of large-speculator bets. Shah takes it further, looking at a ratio of large-speculator bets versus all bets. You can measure today’s bets against a longer time frame; for example, comparing what’s happening today with what happened 20 years ago.

When you use this ratio with gold, an important detail emerges. Currently, large speculators in gold futures have bigger bets against the gold price (relative to all futures bets on gold) than at any time since 2001.

That’s important; gold’s last great bull market started in 2001, from a similar degree of ‘hated.’

Back then, the major gold stock index (the HUI Gold BUGS Index) soared nearly 300% in a little more than two years.

Today, gold is hated. There’s no uptrend yet. However, Shah expects today’s gold extreme means that we are close to the start of the next great bull market in gold.

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