Gold: speculators preparing a reversal?

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

Non-commercial large speculators decreased their net position to purchase gold contracts by 0.1 thousand contracts, bringing it down to 207.6 thousand. After increasing it for nine of the last eleven weeks, these large speculative players slightly decreased their net position. The net position has been decreasing from its peak since April 26, 2022.

Hedger operators have been increasing their net position for selling gold contracts for 10 weeks out of the last 12, with the most recent increase of 3.1 thousand contracts bringing the total to 235.5 thousand - the highest it has been since April 26, 2022.

The open interest rose by 9 thousand, bringing the total to 500.4 thousand contracts.

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 0.03 over the week, bringing it down to 3.50.

The latest Gold COT report shows a slight increase in bearish sentiment among large speculators. Pre-New Year trading was sluggish, resulting in a slight decrease in the net position on rising prices. This has caused the net position to drop from its highest levels in the past 20 months. If this trend continues, it could lead to a decrease in gold prices.

It is advisable to wait for the next weekly report in order to verify the reversal of the net position.

Hedgers have been showing a more optimistic outlook on gold, as they have been increasing their net position in response to the rising prices. If, however, they join forces with the major speculators next week, gold could experience a decline in its momentum.

COT reporting data is essential for medium to long term trading. Large speculators, NON-COMMERCIAL (banks, investment funds) usually follow the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, generally do not have a major impact on the market (red line). Hedgers, COMMERCIAL (operators, large companies) usually go 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.