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CFTC data is being rolled out on an accelerated schedule, and we're seeing the picture for the Gold market getting "roughed" in. The most recent release is for January 22nd, but it surprisingly showed a sharp drop in net-speculative positions as a percentage of open interest. Something that stands out as resoundingly bullish is that speculator longs, as a percentage of open interest, dropped to its lowest on record as Gold made its second higher low from the December 2015 bottom. We will need to wait a few more weeks to see the balance of futures activity but my suspicion is that these readings are going to get much more extreme than people expect before a sizeable correction.

Note that the largest reading ever for net speculative positions (almost 60%) occurred during immediately following the major price breakout in 2009. The price would rally another 20% before a correction began. Contrary to what you read about CFTC reports, you want to see a surge in speculator activity because that's what fuels buying and encourages momentum buying. Like everything else in the markets, context is the key. Surges in speculative activity after a bottoming process are a different beast than surges in speculative activity during bear-market rallies.

There's a lot of strength behind this move and it's going to be very interesting to see how the market behaves when it approaches the major neckline resistance again at $1350-1375. We're seeing major breakouts in a lot of developed world currencies, which should be a sign of things to come for Gold priced in USD.

Without question, if the market catches people off-guard and breaks above the neckline resistance I suspect most market observers are going to be stunned by the velocity of the move towards $1600. If you're bullish on precious metals, as I am, it's important not to get too cute with the technicals. The hallmark of strong trends (either up or down) is that they tend to confound most analysts and technicians. Build your core positions on weakness, prune them on strength, and ride the trend if it unfolds.