CNBC’s Jim Cramer told investors Wednesday that gold is poised to rally, making now the perfect time for investors to pounce.
“The graphs, as interpreted by the legendary Larry Williams, indicate that the general public is giving up gold en masse and this is believed to make it the ideal entry time to make some buying,”money mad‘ said the host.
Gold futures fell on Wednesdaywhich is facing pressure from stronger US dollar and Treasury yields after hawkish Federal Reserve leaders’ comments on inflation the previous day, sent metals lower.
Gold is considered a safe investment and often attracts investors during periods of economic and geopolitical turmoil.
Cramer began his explanation of Williams’ analysis by examining the weekly movement of gold since 2014, paired with data from the Commitments of Traders Report from the Commodity Futures Trading Commission.
The CFTC tracks the futures positions of small speculators and large speculators such as money managers and commercial hedgers, which include companies that work with the commodity.
When small gold speculators head to the upside, this is often a sign that it is about to hit a peak, according to Williams. Conversely, gold tends to be near the bottom when small speculators head lower.
Commitments data for traders reveals, at the bottom of the chart, that small speculators have been in the smallest long positions since May 2019 – just before a big rally in gold. It’s also worth noting that small speculators were in their biggest net longs in four years during gold’s last peak in March.
While that doesn’t mean investors should always do the opposite of what small speculators do, it’s a sign that gold may soon profit, according to Kramer.
“It may be pretty messed up, but it does indicate that in the past nine years, the more net long positions in gold have been, the higher the actual metal has been. All of the best selling points came in moments when large positions were long” Kramer said.
For further analysis, watch Kramer’s full explanation in the video below.
