T2W Trading Community

The next chart gives us a view of Gold from 1993 into 2005 where we see the same general rule to be operative; that is if Gold is going to stage a good rally, the chances are high that it will come in the summer while sells come at year end.  

This is important information. Virtually all the sizeable declines in AU came around the first of the year…this has not been a good time to be bullish on Gold. It is a sucker play foisted upon the masses by the Gold Bug Camp. The first of the year, when they make their gloom and doom prophecies of famine and pestilence, arguing for higher Gold prices is just not when it happens.

Naturally, every year is not the same. There can, and will be, times Gold slips away from the seasonal influence. There is no perfection in this business of forecasting, but now you know the ideal times to look for rallies and declines in this market.

Fundamental Lesson Two: There is a time to sow and a time to reap Gold. It has strong seasonal influences.  

Watching the Commercials

There’s not a need for a channel-changer as we watch the Commercials in the Gold market. The Commercials I’m talking about here are a group of traders/investors called “Commercials” by the United States Government. These people are the users and producers of commodities who are so large and influential that they must, by Federal law, report all their buying and selling to the Commodity Futures Trading Commission every week.

These are the biggest, best, brightest and deepest pocket players of commodities in the world. They are the super powers of finance and need to be followed like a hawk. I have been hawk-eyeing this crowd since 1970 and would not take a position in any market without first seeing what they are doing. Now, I’ll be the first to admit that there are still problems in using their track record of buying and selling to know what we should do. Yet, on balance, I do not know of any other tool with a better job of calling long term market highs and lows.

As you can see this chart above stretches all the way back to the price of Gold in 1984 through 1990. In most instances when the index was high - meaning the Commercials were heavy buyers - Gold usually rallied and when low, Gold declined .  Is it just that simple? Yes.  Sure there are nuances and subtleties to this, but by and large the Commercials do the right thing most of the time. They are an excellent leading indicator of future price action.