CNBC’s Jim Cramer told investors on Wednesday that gold is about to rally, so now is an optimal time for investors to jump in.
“The charts, as interpreted by the legendary Larry Williams, suggest that the general public is giving up gold en masse and he believes this is the perfect time to start buying,” the “Mad Money” host said.
Gold futures fell on Wednesday, facing pressure from a stronger US dollar and Treasury yields after dovish comments from Federal Reserve leaders on inflation the day before 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 looking at gold’s weekly action since 2014, along with data from the Commodity Futures Trading Commission’s Traders’ Commitments report.
The CFTC tracks the futures positions of small speculators, large speculators such as money managers, and commercial hedgers that include companies that deal in the commodity.
When small speculators get too bullish on gold, it’s often a sign that it’s about to peak, according to Williams. Conversely, gold tends to bottom out when small speculators get too bearish.
Trader Commitments data, at the bottom of the chart, reveals that small speculators are in their smallest long position since May 2019, just before a big rally in gold. It’s also worth noting that small speculators were at their largest net long position in four years during gold’s recent spike in March.
While this doesn’t mean that investors should always do the opposite of what small speculators do, it is a sign that gold could win soon, according to Cramer.
“That would be too simplistic, but he points out that in the last 9 years, every time their net long position in gold has been this low, the real metal has rallied. And the biggest selling points came at times when they had big positions. long”, Cramer said.
For more analysis, check out Cramer’s full explanation in the video below.