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Dan Norcini continues:

“When you look at the hedge funds, the hedge funds now have their largest net long position in a little bit more than a year now. So they (hedge funds) continue to buy, and they are generally getting up in the area now that they are starting to become a little bit lopsided on the long side.

We had some liquidations of longs from the small speculators....

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“That was the one we were really worried about last week because they (small speculators) were at an all-time high for a net long position (in gold). They did liquidate some of their longs, Eric, but that being said, they are still at a very high level of exposure on the long side of the market.

Even the large reportable (traders) continue to add to the net longs. So these speculators persist moving in on the long side of the market. Meanwhile, you have the commercials continuing to add on the net short side, and they are approaching a pretty sizable short position (in gold).

Their all-time record was about 237,000 on the net short side (for the commercials), Eric. They are now at roughly 218,000 net short. That’s a sizable net short position they are building. Normally that doesn’t concern me to see that because speculative buying is what drives the markets.

The problem we have now is when you have a market that’s stalling near an obvious resistance level of $1,800, this build is continuing to occur with the speculators on the long side, and the big commercials and swap dealers on the short side.

So what we are seeing now is some guys are starting to go after this relatively overextended (long) position among the speculators, trying to force some downside action, trigger some sell-stops, knock this (gold) market lower, and push out some of these weaker hands.

Again, that action we are seeing in the after-market hours (gold down an additional $5, and silver down another 20 cents) is indicative of what the shorts are trying to accomplish here. So it looks like they have some near-term momentum to the downside.

This might follow through into Sunday night, and possibly early next week. We might see some of these guys (small speculators) get forced out of some of their long positions, and that might bring us down to test the support at $1,740 pretty early next week. I’m going to be watching that in gold.”

Norcini also added: “In silver we have a very similar thing taking place as well, Eric. The hedge funds net long position in this market is the largest they have had in about two years now. So here we are with a very sizable build among the hedge fund community on the net long side of the market.

Meanwhile, and I think this is very noteworthy, those big swap dealers we were talking about last week, which made the very rapid transition from being net long, to very large net shorts (in silver), they now have the largest net short position they have had since January 2008, Eric.

So we are talking almost five years here. This is a very big build by the swap dealers on the short side of silver, against a very big build on the long side by the hedge funds. The big commercial end users, they are not near levels we’ve seen in the past that are excessively lopsided on the short side.

The swap dealers are doing the digging on the short side more recently here than the big commercials. Either way, these markets definitely have a lot of potential here for some liquidation if the support levels in silver get taken out to the downside.

As you said, silver dropped another 20 cents in the after-market. This is very close to testing a major support level here now as we begin the week Sunday night and into Monday morning. If this thing (silver) drops below $33.30 Sunday or Monday morning, we are going to see some additional downside.

We’ve got the potential here for some downside action. Doesn’t mean we are going to get it, but we have to watch these support levels in both gold and silver because we do have the firepower necessary now to take this thing down a little bit more sharply if those support levels are taken out.”

I would just add to what Norcini said here, for KWN readers around the world that dollar cost average into physical gold and silver each month, if next week is the week you are scheduled to buy, go ahead and buy. Do not try to time these markets.

For investors looking to pick up shares in the mining sector, if we do get additional weakness in the metals, the 475 to 480 are on the HUI (Gold Bugs Index) might be a good place to add to positions.

For investors that already have their positions in physical gold, silver, and the mining shares, do not let consolidations or corrections, which are normal during secular uptrends, shake you out of your positions. Readers have to remember that very few human beings have the ability to hold their positions throughout an entire bull market. The key is to have incredible patience, conviction, and at times, courage. I promise you that all three will be necessary to hold on until the eventual mania.

This was just a small portion of the type of critical information which is covered each week in the KWN Weekly Metals Wrap with Bill Haynes and Dan Norcini. To hear a continuation of this conversation, you can listen to the entire interview by CLICKING HERE.

KWN also had a tremendous interview with Art Cashin covering hyperinflation, hard assets, and more. The KWN audio interview with Cashin is available now and you can listen to them by CLICKING HERE.

The interviews with Jean-Marie Eveillard, Bill Fleckenstein, Art Cashin (UBS $612 billion), Jeffrey Saut (R.J. $360 billion), John Embry and Gerald Celente are available now. Also, be sure to listen to other recent KWN interviews which included, Rick Santelli, Michael Pento, Don Coxe, Pierre Lassonde, and Rick Rule by CLICKING HERE.

Eric King

KingWorldNews.com

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More Stunning Developments In The Gold & Silver Markets

Today King World News is reporting on incredibly important developments taking place in the gold and silver markets. Acclaimed commodity trader Dan Norcini told KWN, “... those big swap dealers we were talking about last week, which made the very rapid transition from being net long, to very large net shorts (in silver), they now have the largest net short position they have had since January 2008, Eric.”

Norcini also warned, “This is a very big build by the swap dealers on the short side of silver, against a very big build on the long side by the hedge funds.” Norcini has been stunningly accurate in his predictions of the movement of the gold and silver markets. Now the acclaimed trader discusses incredibly important developments in both gold and silver: “If you start with the gold Commitment of Traders Report, Eric, one thing we talked about last week was the overextended position of the speculative longs in this market. They are building a very sizable net long position.”

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October 14, 2012

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