Are we there yet? Getting closer...
If the price of gold is not guided by regular supply and demand mechanisms, then it must be manipulated? In a world of financialisation - where even the largest of players (central banks) are involved - why is it hard to believe the price of various financial instruments are not dictated by organisational goals. Central banks have mandates and their primary tool is to intervene in bond markets to achieve the outcome they require, are they manipulating, scheming or just doing their job? The gold market is largely set by future contracts that trade at hundreds of times the underling physical availability, commercial traders are the largest entities in this market and like central banks have an organisational goal, mostly and with out argument - to make money. The price of gold has been financialised and dictated by paper contracts that will never see an ounce of gold delivered, is it wrong, should we start yelling about manipulation because the big end of town can dictate price through outright leverage? Or are commercials just like central banks, playing inside the rules (for the most part) and keeping their own interest first - which is to make money! One thing is for sure: nothing is going to change and financialisation is here to stay, like it or not.
Enough of my rant and to the COT charts...
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Both commercials and large speculators are fast approaching contract levels not seen since Trump won the election, then, gold traded all the way down to ~$1,130. The commercials on the week added 7,210 contracts long and decreased their short position by 8,000. Whereas, the large speculators decreased long positions by 16,000 and increased shorts by 3,000. While gold may still trade lower from here, the futures market is reaching overall contract levels that appear balanced in recent history with most of the large speculator froth gone.
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This is my favourite chart in the the COT series, it shows the percentage change in commercial's weekly position (both long and short). When the percentage change is positive the commercials are overall decreasing their net short position, which they have done for a number of weeks now. I added a few blue circles for those that haven't picked up on a pattern emerging and why I really like this chart.
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Large speculators are still net long, however, overall exposure is at levels not seen since gold's last low after Trump's victory dance.
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I thought I'd leave with a mystery chart - most will work it out - as it inversely correlates to the gold price with amazing accuracy.
Cheers
Seth
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(20min delay)