Today King World News is reporting on incredibly important developments taking place in the gold and silver markets. Acclaimed commodity trader Dan Norcini told KWN that in the metals markets, “I don’t recall seeing anything like this since this bull market began 12 years ago.”
Norcini has been stunningly accurate in his predictions of the movement of the gold and silver markets. Now the acclaimed trader discusses these incredibly important developments in both of these markets: “Hedge funds have their smallest net long position since July of 2007. But what it extremely interesting here is that hedge funds now have their largest overall outright short position in history.”
Dan Norcini continues:
“If you go back to September of 2011, open interest in gold hit an all-time record high (futures plus options) of 1,007,000 contracts. But amazingly the hedge funds were only short 4,980 contracts at that time….
“Today the hedge funds are short a staggering 68,700 contracts. What makes this number even more amazing is that it represents an astounding 10+% of the entire open interest in the gold market of 667,000 contracts. So this is by far the hedge funds’ largest short position in percentage terms in history.
The bottom line is I don’t recall seeing anything like this since this bull market began 12 years ago. The hedge funds are now essentially battling against Middle-East and Far-East central banks and commercial banks. The problem is these central banks are behemoths compared to the hedge funds.
So the hedge funds are extremely vulnerable to a reversal in the gold market because of the physical demand in the market from these central banks. Also, he bullion banks get a bird’s eye view of the physical market, and when the time is right they will assist with the kill on these hedge fund and speculative short positions.
Here is what we want to look for: If gold can break solidly above $1,600 it will change the psychology of the gold market immensely. A break above this level will bring in more longs, but more importantly it will trigger some serious short covering.
If gold can clear $1,600 that will convince some of the nervous sideline money to also reenter the gold market. In addition it will trigger some panic short covering from the bears who have shorted gold at lower levels. The massive hedge fund short position represents a great deal of fuel for some upside activity in gold. If gold can break above key levels, that will reverse the algorithms and put those algorithms on the buy side as well.
What I would also like to see is for the XAU and the HUI gold mining indexes confirming that move higher as gold breaks above $1,600. If we look at the HUI as an example, we need to see that index break above and remain above the 370 level. This will help confirm that the HUI has bottomed.
If we have that bottom confirmed in the HUI, coupled with a break in gold above the critical psychological level of $1,600, we could say with a lot more conviction that the bottom is in for both gold and the gold shares as well.”
Norcini had this to say regarding the silver market: “It is important to note that the swap dealers have moved to the long side of the silver market since the middle of February of this year. Since that time they have continued to increase their overall long position in the silver market. So the swap dealers are very bullish on silver going forward.
We also have the bullion banks covering shorts on silver in addition to the swap dealer buying. The hedge funds have been trying to cap the price of silver at $29. What has happened in the last week is that the price of silver is hanging closer to that $29 level.
If silver breaks above $29.35, then we will have to look for silver to take out the critical psychological level of $30. This will bring in the sideline money to the long side of the market. The bears will be in trouble at that point, and trust me they’ll know it. So we’ll see some short covering as the silver market gains traction above that critical $30 level and the bears run for cover.”
Norcini also added: “As far as Jim Sinclair’s call on gold yesterday, if that turns out to be accurate you are right that it will be one of his greatest calls ever.”
The bottom line here is Norcini’s take on the gold and silver markets is very supportive of the upside explosion Jim Sinclair believes is about to take place.