The price of gold is likely to soar. This is what recent the CoT report suggests. At least, people say so. But what do you think?

CoT Gold Report Revealed Something Unusual in August 2018

Many of our Readers have been asking about the recent traders’ position at the Comex. Because we care about investors, we decided to analyze the latest CoT report, which presents the gold futures positions. As a reminder, it is one of the most important publications about the U.S. futures market, including the precious metals market. Although it is issued on Friday with a three day lag, it is a valuable publication, which provides investors with a breakdown of open interest positions, showing the market sentiment.

Let’s take a look at the chart below, which shows the gold futures and options combined traded at Comex. It indicates that non-commercials (speculators; red line) were net long and tended to follow gold prices, while commercials (green line) were net short and generally moved in the opposite direction to the gold prices.

_{Chart 1: Gold prices (yellow line, right axis, London P.M. fixing, in $), net position of commercials (green line, left axis) and net position of non-commercials (red line, left axis) from January 2017 to August 2018 (aggregate version, futures and options combined).}

If they look to you like mirror reflections, that’s what they should look like. Commercials and non-commercials are two sides of the trade. If some are long, then the rest must be short. As commercials hedge against the changes in gold prices, their net position typically moves contrary to the price of the yellow metal. Hence, as commercials take the opposite side of the trade, their net position usually moves in tandem with the gold prices.

OK, now look again at the chart. What do you see? Is there something unusual? There is! The non-commercial players are short now, while the commercial traders are long now. Indeed, in 2018, speculators have been gradually reducing their net long positions. And in August, they finally turned from a bullish stance to scared short. Conversely, the commercial participants have been systematically cutting their bearish net position to become long last month.