Those With Money Are Making Bullish Bets on Gold Prices
If you want to know where gold prices are headed, look at what those with money are doing. Right now, they seem to be severely bullish toward the yellow precious metal. They could send gold prices soaring in 2018.
The first thing that gold bulls need to pay attention to is the Commitments of Traders (COT) report issued by the U.S. Commodity Futures Trading Commission (CFTC). In this report, there’s a small section that looks at how many gold futures contracts are held by money managers. It looks like they believe that gold prices will go up.
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In the most recent COT report, as of January 30, money managers were long (another term for being bullish) on 230,597 gold futures contracts. Mind you, each contract is comprised of 100 ounces of gold. So they were bullish with 23.06 million ounces of the yellow metal. (Source: “Commitments of Traders,” U.S. Commodity Futures Trading Commission, last accessed February 5, 2018.)
If you go back to the beginning of the year, on January 2, money managers were long on 168,423 gold futures contracts. This amounts to 16.84 million ounces of gold.
Doing the simple math here, money managers increased their bullish bets on gold by roughly 37% in a matter of a few weeks. Quietly, they are building up a sizable position in gold, and you will never hear about this in the mainstream media.
Central Banks Sweeping Gold…
Next, pay close attention to the central banks.
I can’t stress this enough, think of central banks as an elephant trying to enter a small swimming pool. No matter how quietly the elephant enters the pool, the water is going to spill over.
Central banks have a lot of money and, with wild swings in currencies, they need something that can provide their reserves some sort of stability. Gold does a great job of this, relative to many other assets.
So, central banks are buying a lot of gold bullion. Mind you, it’s not the big central banks like the U.S. Federal Reserve looking to buy gold. It’s central banks from emerging nations.
Look at the Central Bank of Russia. The bank has made it clear that it wants the yellow precious metal regardless of where gold prices are. In 2017, the Russian central bank purchased 223 tons of gold. (Source: “The Central Bank of Russia Added a Record 223 tons of Gold in 2017,” Smaulgld, January 20, 2018.)
In total, the Central Bank of Russia has 1,838.211 tons of gold, or 17.7% of overall reserves.
Here’s the thing: the amount gold that the Central Bank of Russia holds may sound big, but, when you compare it to major central banks, it’s really nothing. Russia could be buying much more gold.
Gold Prices Outlook for 2018: If You Ignore It, You Could Be Kicking Yourself Later
Dear reader, it’s impressive how ignored gold prices are these days.
Here’s what I see happening. Stocks are getting beaten these days and bonds are facing headwinds. I see 2018 as the year that investors realize the potential of the yellow shiny metal.
I will not be surprised if gold becomes one of the best-performing assets in 2018. Obviously, with time, we will know more.
