In last week’s Gold Futures Market At Extremes Suggests Gold Price Bottom Set For 2018 we showed in great detail why the gold market should be bottoming. This week, with the latest gold futures market update, we see that the extreme situation has become even more extreme. It has reached levels never seen before. The gold (GOLD) futures market is writing history in 2018, this is why.
The point about the gold futures market is the positions of commercial and non-commercials market participants. Especially the non-commercials are at a record low level of net long positions.
Note that we ignore the long term gold price charts in this article, but focus on the gold COT chart.
Gold market at extremes only seen 4 times in recorded history
As said last week, going back almost 10 years in time, it is clear that a similar situation has only occurred only 4 times.
In the meantime, the situation has become even more extreme. With this week’s Commercial of Traders (COT) gold futures report the extreme level has reached a only seen once before in the last 10 years: December 2015. That was before a monster rally, the mother of all short squeezes, took place, especially in silver stocks.
If we check back historic data we see a similar situation as today only occurring once in 2002 and once in 2003.
What makes us excited about this is that it may confirm the cup-and-handle pattern which we recently forecasted in gold. We still believe that the gold market, lead by the gold futures market structure in 2018, is on track to set a major cup-and-handle formation. If accurate, this will be proven to be very bullish for 2019.
Gold market suggests bottom of 2018
Last week we concluded: “For all reasons outlined above we believe that gold is setting a major bottom in 2018, as we speak. Although its price can fall slightly lower, somehow below the important $1200 level, we do not see this happening for more than 3 consecutive weeks.”
We are more convinced than ever that this is accurate.
History suggests that all situations in which the gold futures market reached similar extreme levels resulted in a strong rally which lasted, at least, for the short to medium term. Whether this is the final bottom before the long awaited gold market breakout, anticipated by gold bulls for such a long time, remains to be seen. We will write about this in our gold price forecast for 2019 which will be released soon.