Bears Digging In For The Winter ?

Did you know that when bears go into hibernation they can lose up to 30% of their body weight.

Following data on Friday that gold bears have increased their short position, despite a sharply rising gold price, it seems they are doubling down and perhaps hoping all will be fine after a period of hibernation... while risking similar losses.   

The latest CFTC data suggests that large speculators have increased their net short position to 247 tonnes while large commercials have marginally increased their longs. If the market continues to rise, and the bears are forced to buy-back their loss-making position, then gold could rally very significantly from here … in the words of Bachman-Turner Overdrive … “you ain’t seen nothin yet”.

Meanwhile the extreme long positioning of the US dollar has been reduced and it only remains to see whether the gold bears are sufficiently resourced to hold out… their recent positioning suggests they are doubling up and hoping to hang on.

That said, in a crowded trade it only takes a few breaking rank and starting a short covering rally before it picks up momentum and a rout follows, with gold rising sharply to the upside. 

In short, the bears are looking vulnerable. 

Having cracked the important technical resistance at $1215 (the trendline back to 2005), gold bulls will be eyeing the 200 dma at $1278 with interest – this would for be a worthy target for bulls.

Bears typically hibernate for 7 months by going into a state called torpor – let’s just hope for them they don’t get an unexpected early call about funding their margins …