Gold price: Unusual development on the US futures market

Gold price strongly under pressure

The price of gold came under strong pressure at the end of last week (gold price is falling: JPM and Citigroup are pushing off gold).  At the same time, there was a rapid increase in trading in gold futures on the US commodity futures exchange COMEX.  We look at the current CoT data as of November 5, 2019.

 

The CoT data

The net short position of the Commercials rose by 5 per cent to 317,138 contracts.  Net sales of swap dealers (including major banks) increased by 9.5 per cent to 176,998 contracts.  Converted, this important trading group thus had 550 tonnes of gold on the selling side.  This was the highest value since 24 September 2019.

On the other hand, the net long position of the “big speculators” increased by 1 percent to 279,828 contracts.  Hedge funds and investment companies (managed money) no longer bet much more on rising prices.

 

Volatile “small speculators

Unusual leaps, on the other hand, were made in the activities of the “small speculators”.  These are traders who hold less than 150 contracts.  There was a 51 percent increase in the net long position, after net purchases fell 30 percent in the previous week.

Last week, the price of gold fell by 3.7 percent. At the same time, however, significantly more gold futures trading contracts were concluded on the US commodity futures exchange. The large “short covering” apparently failed to materialise.

 

Gold price under strong pressure

The price of gold came under strong pressure at the end of last week (gold price is falling: JPM and Citigroup are pushing off gold). At the same time, there was a rapid increase in trading in gold futures on the US commodity futures exchange COMEX. We look at the current CoT data as of November 5, 2019.

 

The CoT data

The net short position of the Commercials rose by 5 per cent to 317,138 contracts. Net sales of swap dealers (including major banks) increased by 9.5 per cent to 176,998 contracts. Converted, this important trading group thus had 550 tonnes of gold on the selling side. This was the highest value since 24 September 2019.

On the other hand, the net long position of the “big speculators” increased by 1 percent to 279,828 contracts. Hedge funds and investment companies (managed money) no longer bet much more on rising prices.

 

Volatile “small speculators

Unusual leaps, on the other hand, were made in the activities of the “small speculators”. These are traders who hold less than 150 contracts. There was a 51 percent increase in the net long position, after net purchases fell 30 percent in the previous week.

 

Strong increase in open interest

Open Interest rose to a new record of 690,181 contracts last Tuesday. So there have never been so many gold contracts on COMEX in the weekly CoT data. By the close of trading yesterday, Friday, there was even another increase of 2.17 percent to 705,190 contracts. And that is rather unusual.

 

More bets on gold

Last week, the gold price dropped by 3.7 percent to 1,458 US dollars per ounce (FOREX). Together with rising open interest, this is actually a distinct sign of market weakness. More futures traders (short sellers) entered the market as gold prices fell. At the same time, many gold traders may see the short-term slump as an opportunity to build new long positions. Given the overall high net positions, one could have expected a sharp drop in open interest. This is when traders flee the market and short sellers cover up masses of positions. Obviously this did not happen. The coming week will certainly tell us more about the future direction of the market.