Commercial traders have been buying the recent weakness in metals, while funds have been piling into shorts. Across our proprietary scoring system were are seeing 90+ for net positioning for commercials, and sub 5% for funds on a 18 month basis.
At extremes, the trend following funds are always positioned "max wrong" as they continue to sell into weakness - This offsides positioning is what leads to sharp retrace rallies, and/or the start of the next intermediate move in the opposite direction.
The key here is not to get greedy - While Commercials are bullish, we will note that it is primarily driven by the Producer Merchant category with 100% scores - In order to see a confirmed sentiment bottom, we want to see the Swap Dealers get back over 90% - currently they are only at 62% for gold.
So you can start to position for some buy side scalps over the coming weeks, but be prepared for a retest of these recent lows lows as the Swap Dealers look to position max long for the next intermediate up trend.