COT Gold Charts 2.0

I haven't updated gold futures data for sometime, however, in the face of a falling gold price I thought I'd revisit the commitment of traders (COT) report. Last week there was a sizable reduction in 'large speculator' (spec) long positions (~45k contracts). The 'commercials' (comm) as usual took the other side of the trade and decreased their large short position by a similar amount. What does it all mean? The futures market for gold now looks more balanced and closer to finding a bottom than searching for new lows, despite the European pre-open whack that occurred yesterday. I expect there will be more of these attempts coming up during light trading hours of the day, although, if there is no follow though by US markets than each dumping attempt will become weaker than the previous - seen this pattern in the past and if the market doesn't follow through with new lows then it usually indicates the forming of a bottom with underlining buying strength...to the charts!



Large speculator money is net long, and had a substantial reduction on the prior week. The commercials net short position also witnessed a similar reduction. It's very evident that gold future positions for both parties are quickly approaching eighteen month lows - this also correlates well with previous lows in the gold price - are we close to another higher low in the price of gold?



The commercial rate of change chart for this year is a real beauty, it shows the percentage change in comm position from week to week. I like how it illustrates clearly the highs and lows of the gold price and the large swings in the 'big boy' contracts - they appear to pick gold bottoms with great accuracy.

However, the poor old large speculators...



The specs pick tops with equally great accuracy, unfortunately for them, they've been long and wrong every time this year :-(

Considering COT data is a week old (last Tuesday) and the gold price has fallen since, I expect this week's data to show a similar COT pattern - large reduction in spec positions and the commercials to take the other side of the trade for the win. Looking at COT over a longer period it's clear what the futures market is saying - a low in the gold price is close - the gold market may just be starting a new long term bull market, now wouldn't that be nice!