With Gold Prices Down, Here's Where the Money is Flowing

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As pointed out in a recent article by Money Morning Global Resource Specialist Peter Krauth, there is something interesting happening with gold prices.

Paper gold, controlled by Wall Street, is going down. But demand for physical gold all over the globe is going up every time that gold prices are down.

That's not the only place divergences are occurring in the global gold market. A divergence can even be seen in the difference between Wall Street speculators and commercial interests in the paper gold market.

The speculative momentum players continue piling on shorts, while commercial interests are following a path 180 degrees opposite.

The question remains for those investors interested in gold as to who will be right in the end. The short-term Wall Street speculators or more long-term players?

Speculators vs. Commercial Participants

The weekly commitment of traders report for the week ending May 21, issued by the Commodities Futures Trading Commission, showed the bearishness toward gold among traders continued to grow.

Large speculators' net long positions in gold futures and options continued falling to lows not seen in several years.

Managed money accounts lowered their exposure to gold to the lowest since the CFTC began this report back in September 2009. These accounts were also busy adding to short positions on gold.

Net long gold positions for non-commercial traders such as hedge funds are now at the lowest level since November 2008.

No surprise here. . .speculators hate gold and would rather speculate in stocks at the moment.

By the way, small traders are at the most bearish since February 2001. This is approximately when gold prices began their more-than-a-decade-long bull run.

But it's a completely different story when one looks at what commercial players – so-called "smart money" – are doing in the gold market.

As gold prices have fallen over the past several months, commercial traders have been busy investing in gold with new long positions in the yellow metal.

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  1. H. Craig Bradley | May 29, 2013

    GOLD CAN'T BUY YOU LOVE ( The Beatles)

    Who cares! Paper Gold will continue its decline until events progress and people begin to realize there is no going back. When the global monetary system ( U.S. Dollar Centric) starts to collapse, the masses will get spooked and flee paper assets en mass to gold. The price could move up dramatically at that point largely on fear. Fear is more powerful than greed any day. How long it will stay at its new peak is anybody's guess.

  2. Ken | May 31, 2013

    I have been reading the same doomsday forecasts since about 1981. I remember reading Doug Casey's "Crisis Investing" back then and expecting the sky to fall any day. I still believe there is a huge wreck coming. I moved my family to Alaska so we would have a better chance to survive an economic collapse. Unfortunately, I am getting old now and will probably have a harder time surviving the eminent crash. I guess none of us really have any idea how long the general population will continue clinging to this thread of hope that the economy will recover. I do not believe many folks down there in the lower 48 realize the gravity of the situation.

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