Gold: traders preparing for 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 increased their net position to purchase gold contracts by 3.5 thousand contracts, bringing the total to 203.5 thousand. This marks the third consecutive week of increases in the net position, and 7 out of the last 8 weeks. The current net position is the highest it has been since April 26, 2022.

Hedgers (COMMERCIAL) have been steadily increasing their net position for selling gold contracts over the past 8 weeks, with a total increase of 8.4 thousand contracts to 226.9 thousand. This is the highest net position since May 10, 2022, surpassing the current year's levels.

The number of open contracts decreased by 18.2 thousand, bringing the total to 487.5 thousand.

The ratio of the number of contracts to buy to the number of contracts to sell for the bullish index of large speculators rose by 0.16 over the week, reaching 3.39.

Data from the Gold COT report indicates that bullish sentiment is on the rise. For almost two months, traders have been increasing their net position as prices rise. Additionally, the net position of large speculators has reached a new high in over a year and a half, while the hedgers' net position has also reached a high. If this trend continues, it could lead to an increase in the price of gold.

The net position's rate of increase has significantly decreased, which could be a sign of it turning around. Furthermore, the most recent report may have been distorted due to the monthly expiration of futures. Therefore, the data from the upcoming report, which will be out in a week, will be more telling.

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 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.