russell on latest gold move

Gold -- The whack on the chin that gold received today is strictly technical, brought on by the steady shorting of the Commercials (gold mines and gold banks). Heavy shorting increases the supply. Here's what the shorting of gold contracts looks like over recent weeks.

8/28 -- 195, 541 gold contracts sold short by the Commercials.
9/04 -- 207,800 " " "
9/11 -- 244,914 " " "
9/18 -- 294,440 " " "
9/25 -- 296,413 " " "

The weight of this shorting ultimately had to topple gold -- but only temporarily. After shorting if gold continues to rise, the Commercials simply increase their shorts. The mines can always supply the gold if the price continues higher. If the price of gold declines, the mines can take the profits on their short sales. It's a game, that's played over and over again. And, of course, the Fed and the US government love it, because rising gold is a red flag for the Fed; you see, rising gold tells the public that inflation is heating up.

On the chart, the latest drop in gold hasn't registered yet. By the way, note that gold on the chart rallied 100 points before finally running into corrective action. The correction was overdue, and shorting by Commercials simply intensified the pressure for some kind of correction. For a P&F sell signal, gold would now have to decline to 725. So far, that hasn't happened.