Is Gold Ready to Decline?

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

After a 4-week increase, large speculators (NON-COMMERCIAL) decreased their net position to buy gold contracts by 10.8 thousand contracts, bringing the total to 155.4 thousand. This marks the beginning of a decline from the maximum levels seen since July 25th.

Hedger operators decreased their net position to sell gold contracts by 9.1 thousand contracts, bringing the total to 177 thousand. This follows a 4-week period of increasing the net position to sell.

The open interest rose by 2.3 thousand contracts, bringing the total to 486.6 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 0.17 over the week, bringing it down to 2.57.

Data from the COT report on gold suggests that bearish sentiment is on the rise. After a period of growth, traders began to reduce their net position as prices rose. This decrease in net position was the largest seen in the past four months. Large funds decreased their purchases by 3% for the week, while sales also increased. If this trend continues, it could lead to a decrease in the price of gold.

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

COT reporting data is essential for medium to long term trading. Large speculators, NON-COMMERCIAL (banks, investment funds) usually trade in line with the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, generally do not have much impact 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.