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It’s been a great year to be short gold and long the U.S. dollar, especially since Hedgeye first went bullish on the dollar in April.

Since then:

  • Gold is down -12%
  • The U.S. dollar index is up +7%

This inverse correlation is explicit.

And now, with Gold underperforming (surprise-surprise) Wall Street is now short Gold. Gold positioning puts Wall Street net short by 63,000 contracts, according to CFTC futures and options data. Still, while short Gold is increasingly consensus, it’s simply time to lighten up on short Gold, not give up on the trade entirely, explains Hedgeye CEO Keith McCullough.

Why? Two reasons.

  1. Our call on long the U.S. dollar has room to run (due to the impact of Global #GrowthSlowing).
  2. Gold remains bearish trend, according to McCullough’s proprietary quantitative risk range model.

In other words, the Hedgeye playbook continues to suggest short Gold is still in play, despite Wall Street’s increasingly consensus bet.

“People have made a lot of money on the short side and hedge funds come in and make more money after everybody made money with those net positions,” McCullough explains in the clip above. “Now people will ask, ‘Should I get long Gold?’ No, you just get less net short. Then things will reverse on the bounce and you can short it again.”

Watch the clip above for more.

McCullough: Why Investors Should Stay Short Gold - early look