Futures Speculators Pile Into Gold After Monthly Employment Report

This afternoon’s CFTC Commitment of Traders report reveals that last Friday’s disappointing U.S. employment report led to a surge in net length by large speculators (CTAs, hedge funds, etc.) in gold futures:

 

gold_cot_9-6-2016

There are a few aspects of this COT report which stand out:

  • Large increase in large speculator net length to the tune of more than $4 billion net notional.
  • ~6% jump in open interest largely due to large specs initiating long positions.
  • Small speculators actually reduced net length by adding more than 3,000 contracts short.

This is particularly noteworthy because since the date of the report (Tuesday, September 6th) gold has suffered 3 consecutive losing trading sessions and fallen nearly 2%:

 

Gold (Daily)

gold_daily_9-9-2016

Gold has put in consecutive lower highs since peaking at $1377.50 in early July, resistance in the mid-$1350s now becomes crucial and another test of support near $1310 could potentially be critical in the event of further downside next week. In mid-August I wrote that my base case scenario for the foreseeable future in gold was a rangebound trade between roughly $1310 on the downside and $1350 on the upside. So far that has proven to be fairly accurate and it is now more likely than ever that the next $100+ directional move  will follow a decisive breakout above $1350 or breakdown below $1310.

 

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