CNBC’s Jim Cramer told investors on Wednesday that gold is about to rally, making now the best time for investors to pounce.
“The charts, as interpreted by the legendary Larry Williams, indicate that the general public is surrendering to gold en masse and thinks that this is the perfect entry time to make some purchases,” the “Crazy money” said the host.
Gold futures fell on Wednesdayfacing pressure from a stronger US dollar and Treasury yields following Federal Reserve chiefs’ hawkish comments on inflation the day before took 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 gold’s weekly action going back to 2014, paired with Commodity Futures Trading Commission Traders Commitment report data.
The CFTC tracks the futures positions of small speculators, large speculators such as money managers and commercial hedgers including companies that work with the commodity.
When gold is oversupported by small speculators, it’s often a sign that it’s about to peak, according to Williams. Conversely, gold tends to bottom out when small speculators become too bearish.
Traders’ Commitment data shows that, at the bottom of the chart, small speculators are in their smallest long position since May 2019 – just before there was a major gold rally. It is also worth noting that during gold’s recent peak in March, small speculators were in their largest net long position in four years.
While this doesn’t mean that investors should always do the opposite of what small speculators are doing, this is a sign that gold could soon catch up, according to Cramer.
“That would be too much of a gib, but it indicates that in the last 9 years, whenever their long net position in gold has been this low, the metal has actually come together. And the points came best of all at times when they had great long standing,” Cramer said.
For more analysis, watch Cramer’s full explanation in the video below.