Weekly COT Report: Gold Bugs Retreat Just Off Record Highs
Matt Simpson October 6, 2019 9:36 PM
A summary of the weekly Commitment of Traders Report (COT) from CFTC to show market positioning among large speculators.
As of Tuesday 1st October:
- Bullish exposure on the USD was at $17.5 billion ($20.5 billion against G10 FX)
- Overall, only minor adjustments were made to FX majors on a weekly basis
- Net-long exposure to the USD index (DXY) hit a 2.5 year high
- Net-short exposure nudged its way to a fresh record high, although fuelled by a close of longs and shorts
DXY: By Tuesday’s close, net-long exposure to DXY was its highest in 2.5 years. It’s 1-year Z-score was over +2 standard deviations foe the first time in 12 months. There were also 5.5 long contracts to every short, although this ratio actually peaked at 6.3 two weeks prior. However, this marketed the swing high and DXY has since retraced from its peak, so these metrics will be a little less stretched. From a price action perspective, DXY remain within a bullish channel and the its structure remains bullish above 98.6 so whilst this level holds, we favour a break to new highs.
As of Tuesday 1st October:
- Net-long exposure to gold was reduced by -11.6%
- Platinum traders reduced net-long exposure by 10.5%
- Bullish exposure to palladium hit a 3-month high
Gold: Gold bulls closed 47.6k long contracts last week, their largest weekly reduction since December 2017. This saw net-long exposure drop by 11.6%. Incidentally, the report (which was compiled on 1st October) marked the swing low on Gold. It’s also worth noting that net-long exposure was near record highs ahead of the bullish reduction. (The record high was in 2016). Whilst we’ve observed stretched positioning and warned of a potential inflection point, geopolitical tensions and weak economic data has proven too difficult to build a bear case for the yellow metal. But if those supportive features were to be removed, it then opens up the potential for a deeper correction. For now, gold could remain stubbornly near its highs and trade within a range.
Palladium: Traders have remained net-long on palladium since 2003. However, whilst prices remain at record highs, net-long exposure isn’t flagging a sentiment extreme with 1 and 3-year Z-score at +1.3 and -0.2 standard deviations respectively. Until price action suggests otherwise, palladium appears favourable to trend traders (or those seeking to buy dips).
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.