From today's King World News :

Generally, Eric, I don’t like to make a big deal out of these COT reports because way too many people (attempt to) use them as some sort of “Holy Grail,” but I think at this point, because of the dramatic shift we’ve seen now, we are going to have to start paying attention to positioning of these traders from this point forward.

Based on this most recent (COT) report the hedge funds were still net longs in this (gold) market, and the commercials were still net short. But that did not cover Wednesday, Thursday or Friday’s activity. And as we know, that was huge volume on Thursday, some of the biggest volume we’ve seen in gold for a long, long time....

“There was a big change internally in this market and a huge shift in the composition of who was on what side (of the gold market). My suspicions are like yours. I would not be the least bit surprised when we see next Friday’s (COT) report, to see that maybe a 50,000 contract shift, from basically the commercials being net short 15,000, to perhaps being net long by 30,000 contracts, and the hedge funds (now being) on the net short side of this market.

We have the ingredients for a turn (in the gold market), but all of this is going to depend on some sort of spark to begin to force the speculators out (of their short positions) ... Remember, you don’t have the short selling from the commercial category anymore. They are on the long side. So if you are going to get this market to drop lower, you are going to have to have hedge funds and other speculators who want to aggressively sell (gold short).

... We have had a significant retracement in gold. I’m not saying it can’t go lower, but what I am saying is that it’s going to take a lot of fresh short selling to drive this market down substantially lower at this point. At some point the risk/reward ratio no longer favors being short in gold, and it could be that we are getting very close to that level right now.”