Thursday, September 4, 2014

Gold COT Chart

The Commitments of Traders (COT) chart continues to trail lower off the July high. The red circles show the significant tops in the gold price and the green circles show a significant bottom where a rally begins. The double circles are key bottoms and tops. The recent top occurs with the large speculators 80% bullish which was an incorrect path ahead while the commercial traders were smarter only about 30% bullish which was the correct outlook ahead since gold price dropped from 1340 to the current 1262.

So the obvious conclusion that jumps out at you is that gold price needs to drop more to place an attractive bottom. Note that the red bars and light blue bars are not yet near the green circles that may call the next bottom. The COT is tricky, however, since the data lags by a few days and up to a week or two. So to some extent you are looking in the rear-view mirror to chart the path forward. Nonetheless, the COT is hinting that gold has some downside ahead before the bottom occurs. Note about one month ago there was a little jog in price with a quickie bottom and bounce occurring only to give way again so the red bars and light blue bars really need to decrease in size to set the gold bulls up for a rally.

If the COT is married to the previous weekly candlestick chart, the expectation would be for the tight band squeeze to send gold prices lower so the 1180-1220 area before a substantive bounce occurs. Any bounce that occurs now, in this near term, would be suspect as time moves along with weaker prices expected until a substantive bottom can be placed. Once the bars appear in the green circles in the right margin the gold bulls will be ready to pile all-in for a ride back up. For now, the COT says lower. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

The chart is provided courtesy of the COT Price Charts (click this link) web site that is highly recommended since many other COT charts are available for commodities as well as gold. The chart is annotated by Keystone.

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