CNBC’s Jim Cramer on Wednesday told investors that gold is poised to recover, which is the optimal time for investors to rush in.
“The charts, interpreted by the legendary Larry Williams, suggest that the general public is abandoning gold in bulk and he thinks it’s the perfect time to buy some,”Crazy money” said the presenter.
Gold futures fell on Wednesdayfaces pressure from a stronger US dollar and Treasury yields after Federal Reserve leaders commented on inflation a day before sending the metal lower.
Gold is considered a safe investment and often attracts investors during times of economic and geopolitical uncertainty.
Cramer began explaining Williams’ analysis by looking at gold’s weekly action from 2014, combined with Commodity Futures Trading Commission Commodity Futures Traders’ Commitments report data. .
The CFTC tracks the futures positions of small speculators, large speculators such as money managers, and commercial underwriters including companies that work with this commodity.
According to Williams, when small speculators are too bullish on gold, it is usually a sign that it is about to peak. Gold, on the other hand, tends to be close to bottoming when the bulls get too low.
Trader Commitment data, at the bottom of the chart, reveals that small speculators are in their smallest long position since May 2019 – just before a major gold bull run. Also worth noting is that small speculators were in their biggest net long position in four years during gold’s recent peak in March.
While this does not mean that investors should always do the opposite of what small speculators are doing, it is a sign that gold could soon rally, according to Cramer.
“That would be clumsy, but he points out that over the past nine years, whenever their net long position in gold has been this low, the metal has actually gone up. And selling points. The best runs come at times when they have a lot of long positions,” Cramer said.
For more analysis, check out Cramer’s full explanation in the video below.