Gold Bearish Reversal: View from Cot Data.

Like some kind of myth or fairy tale lies in our imagination that banks and funds have infinite money and they can manipulate(sometimes it’s true) the markets at they will with all their incredible buying/selling capacity. Cot data tell us a different history and if you right now stop for a moment to think you will realize that this is truly a fairy tale. Funds and banks trade on behalf of their clients so they need clients to deposit on their institution to trade and even if the sum of the money with theses banks and funds are something like 100 trillion USD still it would be finite, agree? 

I hope we agree with the previous topic and let’s move to another, the trend is your friend, right? This is so right and this is how hedge-funds, banks, big speculators(non-commercials) do their trading, they keep adding to winners and fuelling the trend. You don’t need to have an eagle eye to appreciate how closely the fund net position parallels price movement.

Well every strategy has its weakness and this one should not be different, the problem with this approach is they typically are caught holding their largest position at the top or the bottom when the market turns. They buy on a scale up, so, naturally, they will have a considerable large position to sell and its impossible to do it without moving the markets, even if they want to.

Let’s move again, so imagine you are a manager of a big fund and you are already using the max leverage allowed by the risk( you exhausted your buying capacity)  department of your institution, and you are with a really big profit and you know the above we just discussed what would you do? Yes, of course, start taking profit as soon as you can, before others do. And that’s my friends the start of a reversal and exactly what happened with GOLD in the week starting on 01-Sep-2019.

I don’t know if the market was risk-on or risk-off, also had no idea if Trump would or not scale Trade War or if Chinese would retaliate USA Tariffs, but there was one thing I knew for sure, that NOBODY LEFT TO BUY GOLD!

First Check the Nonspreading Open Interest:

“This one is the most used and simple is [long contracts + short contracts] for each of the groups (commercials and non-commercials)”

And The sell signal happened on the open of the weekly candle

So to conclude have in mind that even funds and banks run out of money to add to their positions and that’s the reason why trend changes often coincide with peaks in nonspreading open interest. 

Buying/Selling Capacity is the near-record open interest for NON-Commercial( Commercials have almost infinite pockets, will explain it in another article).

Please leave your comment will be a great pleasure to reply to you and also try our Cot Data Signals and Charts Tool 

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Comments (2)


Gold is finishing its pullback after its bullish momementum up to 1560 in previous weeks across the weekly/monthly time frame. After blowing through the 8 year high of 1438 we can see a retest of the weekly 1500 area. All we need is breach of the counter trendline on the 3rd bounce following a close above 1510 to see another 1000 pip rise. If we see a close below the ascending trend line it would indicate a much larger pullback. Still bullish bias on this pair either way.

What are your thoughts?

From the point of view of big players positioning GOLD can struggle to go up, still thinking that the easiest path is down until big players cut their longs. Have a nice day.

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