Comments: Last week's Commitment of Traders report showed the largest net short interest in Gold contracts during the last year, which definitely helps explain the action of the last week during which gold gave up around $45. Major tops in Gold have frequently been marked by peaks in the net short interest of commercial traders.Unfortunately, it typically takes about 8 weeks for this kind of situation to reverse itself so I'm not expecting any huge comeback rallies anytyime soon, though a bounce here seems quite plausible. Hopefully this week's report will show commercial net short interest falling precipitously again.
The COT report is not perfect as a timing device and commercials are not always right. For instance in April to May of 2006, it seemed that the trade went against them as Gold soared higher while net short interest stayed about constant. More often than not, however, commercials have been in control and it has paid to follow them.
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