Gold: Has the net position fallen to reversal levels?

The Commodity Futures Trading Commission (CFTC) reported, for the week ending last Tuesday, that the Commitments of Traders (COT) reports showed.

For the third consecutive week, large speculators (NON-COMMERCIAL) decreased their net position to purchase gold contracts by 19.8 thousand contracts, bringing the total to 71.4 thousand. This is the lowest net position since November 1, 2022.

Hedgers (COMMERCIAL) decreased their net position for the sale of gold contracts by 21.6 thousand contracts, bringing it down to 90.4 thousand. This marks the third consecutive week that hedger operators have reduced their net position for sale.

The number of open contracts rose by 5.3 thousand to a total of 436.5 thousand.

The ratio of the number of contracts to buy to the number of contracts to sell for the bullish index of large speculators decreased by 0.19 over the course of the week, bringing it to 1.48.

Data from the Gold COT report indicates a growing bearish sentiment among traders. Over the past three weeks, net positions on rising prices have been significantly reduced. Last week, the net position hit a new low not seen in over 11 months. Large funds increased sales by 9%, while purchases were also decreased. If this trend continues, it could lead to a decrease in gold prices.

The net position dropped to the lows of early November last year, but then it rebounded and reversed its direction, going up instead.

COT reporting data is essential for medium to long term trading. Generally, large speculators, NON-COMMERCIAL (banks, investment funds) tend to follow the trend (blue line). On the other hand, small speculators, NONREPORTABLE POSITIONS, usually do not have much of an effect on the market (red line). Hedgers, COMMERCIAL (operators, large companies) usually trade against the trend (black line). The net position is the difference between the number of buy and sell contracts. Open interest is the total of all open positions in the market.