Gold: traders reverse the net position

The Commodity Futures Trading Commission (CFTC) COT (Commitments of Traders) reports for the week ending on Tuesday last week showed:

Non-commercial large speculators decreased their net buying position in gold by 19.7k contracts, bringing it down to 173.6k. This decrease in net buying position follows a 3-week period of growth. The net position has been declining since it reached its peak on May 9th.

Hedger operators decreased their net short position on gold contracts by 15.5k contracts, bringing it down to 198.2k. This decrease in net sell position follows a 3-week period of increasing their net sell position.

The number of open contracts decreased by 5.9 thousand, bringing the total to 476.2 thousand.

The ratio of the number of buy contracts to the number of sell contracts for the bullish index of large speculators decreased by 0.42 over the week, bringing it down to 3.33.

Data from the Commitment of Traders (COT) report suggests bearish sentiment in the gold market. After a 3-week build, traders began to reduce their net position on rising prices. This decline in net position was seen from the maximum levels over the past 2.5 months, which were close to the highs for almost 15 months. Large funds reduced their purchases by 6% for the week, while sales were also increased. If this trend continues, it could lead to lower prices for the precious metal.

COT report data is essential for medium and long-term trading, and is mainly used by large speculators, NON-COMMERCIAL (banks, investment funds). These traders usually follow the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, however, do not have much of an 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, while open interest is the total of all open positions in the market.