Are Big Institutional Purchases A Bullish Sign?

A friend of mine recently sent me a newsletter where the writer was bullish on gold and mentioned that the University of Texas announced that they now hold $1 billion of gold bars.

I responded that this is not necessarily a bullish sign. This is an old trick that traders use to get out profitably from large positions.

It might be the case that, having accumulated this large gold position, the university is sitting on a profit.

With a large position, they will need liquidity in the form of buyers if they want to sell some or all of the position without driving down prices.

So, now they announce the purchase to encourage people to jump in to the market, and their brokers will sell their gold to them :-)