During the reporting period, gold futures prices remained range-bound, between 765 and 725, closing Tuesday the 11th at 732. Thursday, which is not included in this current report, saw gold spike down to make a double-bottom at 698, almost to the penny, but prices rebounded immediately to close out the week with a small gain, Friday to Friday.

On the report, 122 large speculator longs (down 6 from last week's registrants in this category) were long 102,869 contracts, down from 107,197 last week. 81 large speculator shorts (up from 68 in last week's report) were short 50,873 contracts, up from last week's 46,032 contracts. For the third straight week, the longs liquidated a bit and the shorts got more aggressive. Still, the average position for large speculator bulls was up slightly for the week (from 837 contracts to 843 contracts), because the 6 players who liquidated got out of relatively small positions, considering the category. The average position for bears declined a bit (from 677 contracts to 628 contracts), again because the new shorts who came in established relatively small positions. Although the numbers aren't as dramatic as they have been over the past 6 months, the large speculator bulls still outnumber and outspend the large speculator bears.

The commercial net short position declined quite a bit, from last week's 71,169 contracts to this week's 59,204 contracts. This is the lowest commercial net short position I can remember since before 2002. This seems bullish on the surface, but may not be. A fellow named John Cassimatis published a piece on Kitco's commentary page that raved over how bullish this week's report is, because the large speculator bears came in with over 4,000 contracts in new short positions. He remarked that large speculators "...should always be faded." Not necessarily. You fade the large speculators who are losing the fight for power, not those who are winning. Right now, it is the large speculator shorts who are still underfinanced and underrepresented in this report, relative to the large speculator longs, so the report IS bullish, but only slightly. For the last 3 reports, the bears have actually gained a little ground on the bulls.

This is starting to concern me. 3 weeks MAY be the beginning of a trend. What I do NOT want to see is the large speculator bears continue to gain on the large speculator bulls, ESPECIALLY on rising gold prices. Most people who follow these reports on only a casual basis tend to look at the commercial net short position -- they are conditioned to deduce that the more this number shrinks, the more bullish things are for gold. Not necessarily, say I. If they are buying to accomodate a shift in the large speculator balance of power, then a shrinking net commercial short position is BEARISH, not bullish. Commercials do NOT speculate -- they merely balance and re-balance their net positions according to what the large speculators are doing.

Still, the report is more bullish than bearish, and by a fair amount. Back in 2007, when gold began its historic run from 640 to 1030, the bulls outmanned and outgunned the bears, but by MUCH smaller margins than we are seeing now. 641 contracts per large speculator bull, to 491 contracts per large speculator bear. So, this week's report IS still on a bullish trajectory. But it is not the cinch Mr. Cassimatis is drooling over.

Again, we do NOT want to see the large speculator bears doing scale-up selling -- that is, increasing in number and positions held while gold is rallying.

Just before this bull market really got going, in 1998-1999, and again in 2000-2001, the large speculator bulls were doing scale up BUYING, into falling prices, as the bears were slowly losing THEIR grip on what was then a gold bear market.

Tops are like bottoms, in that power shifts slowly, and momentum comes later. So, we'll have to watch these numbers carefully during the coming period of traditional seasonal strength in gold. So far, though, the bulls are firmly in charge. Open interest, overall, dropped another 10,000+ contracts, to a total of 460,180 contracts. In a sideways market, this is good for the bulls. The long liquidation may be coming to an end. In the past, especially into seasonal lows, overall open interest levels of 400,000 to 470,000 contracts have served as launching pads for substantial seasonal rallies, almost always to new highs. We'll just have to wait and see.

Good luck, all.