Gold: Traders reverse net position from 20-month peaks

Based on the CFTC's COT (Commitments of Traders) reports for the week ending on the previous Tuesday:

The net position for buying gold contracts among large speculators (NON-COMMERCIAL) decreased by 19 thousand contracts to a total of 188.6 thousand. This is the second consecutive week that large speculative players have reduced their net position for buying gold contracts, following almost 11 weeks of increases. The net position has been steadily declining from its peak levels since April 26, 2022.

Commercial hedgers decreased their overall selling position in gold contracts by 17.8 thousand contracts, bringing it down to 217.7 thousand. Operator hedgers also decreased their selling position, following a trend of increasing it for 10 out of the past 12 weeks. This decrease in net position began after reaching its peak since April 26, 2022.

The open interest dropped by 10.5 thousand contracts, reaching a total of 489.8 thousand.

The optimistic measure of significant investors (the proportion of buy contracts to sell contracts) decreased by 0.23 to 3.27 during the week.

The latest Gold COT report shows a growing negative outlook among traders. In the previous week, both hedgers and large speculators decreased their net position as prices rose. This trend continued as hedgers and large speculators reduced their net position, reaching the lowest levels in the past 20 months. Large speculators decreased their purchases by 7% in the past week. If this trend continues, it could lead to a decrease in the value of gold.

The data from COT reports is essential and is primarily utilized for trading over a medium to long period. Large speculators, such as banks and investment funds, typically follow the trend indicated by the blue line. Small speculators, known as nonreportable positions, have minimal impact on the market, as shown by the red line. Hedgers, including operators and large companies, usually trade in opposition to the trend, represented by the black line. The net position is determined by the difference between the number of buy and sell contracts. Open interest is the total of all open positions in the market.