Small speculators in gold futures have accumulated the largest net notional long position in gold futures in more than 3 years:
As of the most recent CoT data small speculators (independent traders, usually not hedge funds or CTAs given their smaller position sizes) hold a nearly $3 billion net notional long position in gold futures. This is the largest net length since April 2013 (the month of the gold crash) and is as clear a sign as any that the gold rally has reached the acceptance stage.
The interesting aspect of this dynamic will probably be revealed shortly. If gold is in a longer term bull market then the acceptance stage will eventually give way to a euphoria stage – for example net speculative length by small specs reached ~$10 billion in September 2012 which makes $3 billion look relatively tiny. However, if gold is now in a longer term bear market then the acceptance stage is likely to mark a short/intermediate term peak.
Some market commentators may try to ascribe some greater meaning to this morning’s rally above $1250 in gold, however, price remains well within the recent trading range and until price moves out of the range the daily price gyrations are nothing more than noise. The next key upside levels for US dollar gold are the March high at $1287.80 followed by the January 2015 double-top at ~$1308.