Good Sunday to you. Here are the links of the week.... 
 

Bracing for Breakdown in Gold Miners
The gold miners have traded sideways for 11 days. Are they setting up for a break to new lows...?
 

Precious Metals Video Update
A look at Gold, Gold Miners and Gold's CoT. 
 

Commodities Approach Major Support
Tiho Brkan's latest thoughts on commodities. 
 

Eurozone Reacts to Anticipated Fed Rate Hike
From SoberLook. Includes many charts. 


History Rhymes: A Look at Stock Market Analogs
Many compare the equity market to 2011 or 1998. Jesse Felder makes the comparison to 1937. 


Money Managers Have Record Allocation to Corporate Bonds
Some believe the next crisis will be in corporate bonds, specifically in junk bonds.  





Premium Snippets 




Let's take a look at the recent Gold CoT....

The chart below shows the net speculative position as a percentage of open interest. Same for gross longs and gross shorts. Gross longs minus gross shorts equals the net position.

As of Tuesday the net position was 6.5%. That is good for bulls but not necessarily bullish. Over the past few years, lows in Gold have come at 3% to 6%. The summer low at $1080 was at 3%. For their to be real capitulation, gross longs need to give up. That 49% needs to go below 40% to show that. At the same time, the gross short position could rise above 46%. That is what would give Gold a sustained bottom. It is the combo of a huge short position with a reduced or low long position. The market can rebound and build on it, with that type of CoT construction. Keep in mind, 30% long plus 50% short would give a -20% reading. The specs would be net short.

In summary, the net spec position of 6.5% is quite low but we are not going to get bullish until the net spec position is negative which means the specs are net short. 
 

The debt in Gold producers has increased 6-fold since 2011! Some of these companies could go belly up if Gold stays below $1100 for a while. This is why one should avoid GDX and the large producers at all costs. 



 



We have to reiterate what we wrote last week:

The US$ index is less than 1.5% from what could be a major breakout while Gold and Silver are essentially trading around their lows. The metals remain very oversold and odds favor them bouncing higher before they begin another leg lower. That being said, with the US$ so close to a breakout and metals barely holding support- the downside risk remains. Will that come to fruition in the days ahead or in a few weeks? No one knows.

It is a tricky situation. Miners and metals especially are quite oversold and could rally or even trade sideways for a few days or even a few weeks. At the same time they could be a day or two away from breaking to new lows. Gold has led this leg down as it already broke its summer low. The miners (GDX, GDXJ) and Silver have yet to break that low.

In the past two premium updates we've spent some time analyzing our favorite junior companies and some on our watch list. The companies with the best fundamentals (strongest deposits or lowest cost production) have held up the best. Everything and everyone else is falling by the wayside. A few companies on our watch list with decent deposits (uneconomic right now) and cash are trading around 2x cash. With the potential for Gold to drop another $100-$200/oz ($890 on a spike low?) these types of companies could end up trading very close to cash value. That typified the major bottom of the early 2000s.

The good news is if Gold drops another $100-$200/oz then even the absolute best companies will get hit. Those are the ones I'm interested in because they will survive and they will lead the recovery in 2016. Companies with C-grade fundamentals could ultimately rise 10-fold or more but they may not begin to rip higher until 2017.  

We are big long-term bulls on the precious metals sector but we do not want to be buyers until the sector becomes extremely oversold and trades near major support (think Gold $970 or Gold $900) amid extremely bearish sentiment (think CoT's, put-call ratios, surveys, discounts to NAV all showing extreme sentiment). The odds are not yet in the bulls favor but if the sector breaks lower and Gold loses $1040/oz then the odds will come into our favor. 


Whether you are accumulating Gold and Silver or want to speculate on promising juniors, our service can help you. We provide objective and actionable research on Gold, Silver and the companies. And we provide fundamental analysis reports of the companies. We also keep our eye on other markets. We are one of the only newsletters in the space that trades a real portfolio. That means our goals are aligned with yours. And we are one of the only editors who is a professionally credentialed analyst.

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