DiCoTomous: Gold Price Trends And CoT Report Analysis

Yes, we wrote about the latest Commitment of Traders report last week, but the situation has only improved in the time since, so I figured we'd better write about it again today. Perhaps you should look it over as a refresher before we get started.

The title of this week's post is a play on words because the current Commitment of Traders (CoT) setup for gold is far better than it is in silver. More on that next week. For today, let's focus instead on gold.
At present, I continue to see all sorts of bearish internet commentary, mainstream news articles, and posts on X. Most of these have to do with gold being a "crowded trade" where seemingly everyone is long, thus making likely a sharp pullback in price.
Well, price may pull back soon. It always does, and higher highs with higher lows is what defines a bull market in just about anything. However, the point of this post is to make clear to you that any further pullback in price is NOT due to COMEX gold being "overcrowded" or "overbought". In fact, quite the opposite is true.

Large Speculator And Commercial Positioning

Below is the most recent CoT report. It was surveyed at the COMEX close of Tuesday, April 29, and released late in the day on Friday, May 2. Over the course of the five-day reporting week, the price of COMEX gold fell by $85, and you can see the position changes below. In general, Speculators were net sellers and the Commercials were net buyers.

But those are just numbers without context, and it's the historical context that matters. To that end, please follow along as we do some math.
To find the summary or NET long position of the Large Speculators, we subtract the gross short position from the gross long position. When we do so, we get this:

• GROSS long 240,377 contracts
• GROSS short 77,059 contracts
• NET long 163,318 contracts

Now, 163,318 COMEX gold contracts is nothing to sneeze at. In fact, with each contract alleged to represented 100 ounces of gold, the total position is 16,331,800 ounces. Again, that's a big number, but it's useless without context, so please allow me to provide some.
The Large Speculator NET position is actually DOWN quite a bit since early February. Yes, you read that correctly. It's down substantially. But how can that be? You've been told that gold is "crowded" and that "everyone is bullish". However, on COMEX, where price is discovered via futures trading, the primary buyers—The Large Speculators—have been using the price rally since February to trim their positions. By how much? See below:

Comparing Hedge Fund Positions

As you can see, back on February 4, the Large Speculators were substantially more bullish. By how much? Almost twice as much!

• GROSS long 356,500 contracts
• GROSS short 53,992 contracts
• NET long 302,508 contracts

And what was price back on February 4? $2900 or nearly 15% LOWER!

And if we drill into the report and break it out by category, the picture remains the same. On the disaggregated report, the "Hedge Fund" category was NET long about 105,000 contracts as of last week:

But if we go back to February 4—again, when price was 15% LOWER—the Hedge Funds were collectively NET long almost 210,000 contracts!

Is The Gold Trade Really Crowded?

Knowing this, how can anyone claim that, at least on COMEX, the gold trade is "crowded" or "overly bullish"? Instead, quite the opposite is true.
And here's a little more context...
How far back in time do we have to go to find similar NET positioning for The Large Speculators and the sub-group Hedge Funds? How about Tuesday, February 27, 2024. (Again, many thanks to Goldseek for these colorful tables.)

And where was price back on February 27, 2024? Just above $2000 and ready to break OUT and UP, not down and lower.

Strategy Going Forward For Gold Investors

In summary, the gold price may go up or down over the days and weeks to come. No one can say for certain what comes next. However, if price falls, it will not be due to some insane amount of hedge fund bullishness, and any drop in price will only serve to further trim the relatively small positions that Speculators have at present. As such, it would seem that buying dips is a better strategy than selling rips, and if gold goes "on sale" again, I plan to take advantage.

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