• 10 hours Bezos Is Heading To Space This Sunday
  • 4 days El Salvador’s Surprise Bitcoin Move
  • 7 days Markets Unfazed As Inflation Hits 13-Year High
  • 7 days How the Token Economy is Disrupting Financial Markets
  • 9 days FBI Investigating 100 Types Of Ransomware Attacks
  • 11 days Fed Ends Corporate Credit Emergency Lending Program
  • 13 days AMC Becomes the Latest Winning Meme Stock After GameStop
  • 15 days The Real Reason Your 401k Has Been Lagging
  • 15 days China Lifts Cap On Births, Allows Three Children Per Couple
  • 17 days The Market Is Ripe For Another GameStop Saga
  • 20 days Senate Grills Big Banks Over Pandemic Opportunism
  • 22 days Cannabis Has A Major Cash Problem
  • 22 days Ransomware Netted Criminals $350M In 2020 Alone
  • 23 days Russia Is Taking On Google
  • 24 days Chinese Regulators Deal Another Big Blow To Bitcoin
  • 25 days Ohio Residents Brave Vaccine for Chance To Win $1M
  • 27 days Inflation Is Coming. Are You Prepared?
  • 28 days Travel Might Get Another Supersonic Disruption
  • 29 days The World Is Running Out Of 6 Key Resources
  • 31 days $15/Hour Minimum Wage Might Happen Naturally
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Dan Norcini

Dan Norcini

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on…

Contact Author

  1. Home
  2. Markets
  3. Other

Gold Commitments of Traders: Worrisome

To sum up my view of this week's COT report in one word.... WORRISOME.

I use that word because of what we saw happen to the safe haven trades today on account of that monster rally in the US equity markets.

Gold was under pressure for the entirety of the session today but seemed to especially weaken into the late afternoon hours as the US equity markets kept pushing higher and went out near the highs of the day. That more than likely will translate into additional downside followthrough in Asian trade Sunday evening. Where it goes after that will depend on whether or not dip buyers show up.

Let me show you why I am concerned.

Gold 2-Hour Chart
Larger Image

First of all, on this TWO HOUR CHART, you can see that there was a huge spike in volume last Friday during which gold ran to $1280. Recall that was the day that the payrolls data was released. Yesterday, the day of the announcement by the ECB of additional stimulus measures to be implemented, gold spiked higher but then faded. Notice that the volume was lower. That is a warning that bulls should not ignore.

Now, as long as the lower two support lines hold firm, there is no need for concern. If those lines give way and if price does not recover above them right away, there is the real danger of some significant long side liquidation occurring. Why? Look at this chart of the hedge fund outright positions, both shorts and longs.

Gold Price, Hedge Fund Longs and Hedge Fund Shorts
Larger Image

This is the highest number of longs that they have carried in thirteen months.

Over against this is the following chart.

Swap Net Positions
Larger Image

This is the largest net short position of the Swap Dealers in the same thirteen months while the Commercials have the largest net short position in 37 months.

On a percentage basis, the combined short positions of the Commercials and the Swap Dealers remain near levels commensurate with interim tops. Also, the combined long position of the large specs is also quite elevated.

Gold and Gold CoT
Larger Image

Gold Disaggregated CoT
Larger Image

This is important - I have not been as concerned about these high levels of spec longs in the market as I would normally been otherwise for the one reason that the reported holdings in GLD have steadily increased during the entire time this imbalance has existed. That development has been a signal that gold demand in the West remains rock solid.

GLD Gold Holdings versus Gold Price
Larger Image

As long as this GLD does not falter, specs will hang tough on the long side. If however, they were to see any faltering of demand, as evidenced by a fall in the reported holdings, plus a downturn in the HUI/Gold ratio, we could see some nervous longs head for the exits.

HUI/Gold Ratio Daily Chart
Larger Image

We'll see what we get Sunday evening but unless there is something that changes over the weekend, I expect to see gold open weaker Sunday evening here in the West. Much will depend on whether or not sentiment towards risk remains like it did today (Friday).

 

Back to homepage

Leave a comment

Leave a comment