each of the spikes in long gold contracts preceedes a peak in the POG. This is an accumulated position over time with the majority of contract purchases occuring well before the peak. Then as the POG falls, longs quickly liquidate to lock in profits. I don't necessarily see the longs getting it wrong, they are just trading a position.
One key observation I can make is:
- the aggregated long positions seem to be getting larger over time. that is more players AND/OR larger players.
lets compare the sept 05 peak in gold long contracts with the march 08 peak. hmmmmm for the march 08 there are more contracts taken out and the POG doubled over that timeframe.
Another thing to look at. the Sept 05 peak coincided with a confirmed break out to the upside. Sept 07 also coincided with a confirmed breakout. Both these peaks in long positions were followed by the POG reaching new highs in the following march april months (i.e. 06 and 08 respectively)
My thoughts are that the current long position in gold is a reflection of the speculative market believing that the POG has broken to the upside (confirmed). Following hte pattern of previous years, the POG did break out and reached new highs in the folloing march/ april period. Historically gold does well between sept and march ...... hmmmm
My conclusion, stay long gold and sell into march next year. she is going higher and current trading at $1000 is the classic buy point before the next leg up.
