On Aug. 1, 2013, December 2013 Gold (COMEX:GCZ13) opened at $1,323.40 an ounce and closed the month at $1,396.10, a $45.70 move. This past week gold opened at $1,393.60 and the close again was $1,396.10.
Now while some of the daily moves in gold may have been caused by tensions with Syria and a possible U.S. military strike, what else moved gold up to break above $1,400 and test $1,420, a previous area of resistance? First let me say that markets do not move because of some chart pattern you see, or some technical line crossing another technical line. Markets only move on buying and selling. And the biggest buyers and sellers can be watched each week on the COT Disaggregated Report.
Now looking at big money and why I see a bull posture starting, we need to look at the weekly chart. Looking back to the sell side on the Aug. 2 COT report we saw Swap Dealers adding to net shorts at -21,360 and on the Aug 30 COT report they moved to a net short position of -67,108 contracts. Producers on Aug 2. were net short -4,414 contracts and by Aug. 30 were net short -20,530 contracts. On the buy side we saw Managed Money on Aug. 2 at 52,029 contracts net long and on Aug 30 70,389 contracts net long. This increased buying and selling is what truly lies beneath gold’s move up in August. And yes Swap Dealers in gold are hedgers, not speculators.
Going back further to the Oct. 5, 2012 COT report when gold was trading near $1,800, we see Producers net short -216,256 contracts, Swap Dealers net short -53,014 contracts, and Managed Money net long 162,990 contracts. So as you can see Producers have some catching up to do and it looks like they are just starting. So for the time being Swap Dealers will be the stronger sell side of gold.
And while day to day we will see gold up and down, if we see “big money’s” bull posture continue, week to week, and month to month gold will continue to rise. Watch for a break and close over $1,420 for the next ride up. Have a prosperous trading week.
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
Proceed to Page 3 for this week's detailed fundementals...
First a quick look at the daily chart where we see the strong uptrend that started when price action broke above $1,300, as reflected by the green technical set-up line, has weakened with ADX numbers dropping from 40 to 26.8 and DI Differential found on the Futures Strategizer at Trends in Futures is well under 5.00. MACD has dropped divergence from above the signal line and Stochastics are correcting from overbought territory like we saw late July.
Click to enlarge.
Have a prosperous trading week.
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