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COT Data Signals Bottom Is in Place or Close

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While Banks and Commercials ostensibly remain heavily short Gold, Hedge Funds have slashed their net long position to 62k contracts, just 33k above the low in March 2021 when Gold bottomed at 1675 for the first time.

chart 1

And this was as of May 10, when Gold was at 1841. It has since fallen even further to 1797, meaning the Funds have likely cut their net long position even further. While this does not guarantee that a major low is imminent—the Funds could go net short before the bottom is in—it does signal we’re close to the bottom, especially with the daily RSI oversold near 30.

It also suggests something that I have suspected of the CFTC data on the banks’ positions for quite some time: They bury big net long positions in the Other Reportable category to give the impression that they are much shorter than they really are, shown in the SWAPS category:

chart 2

This shows the net position of the Swaps and Other Reps combined:

chart 3

Note how their combined net short position of 54k contracts is almost the mirror image of the Funds’ net long position of 62k.

The key takeaway is that the worst is behind us even if we have further to go on the downside, and the turn up in Gold is coming.

SILVER

Funds have their lowest net long position, near-zero, since mid-2019.

chart 4

Banks are near zero too…

chart 5

When Other Reps are added, they’re long!

chart 6

In summary, positioning is sufficiently neutral for a major low or at least a healthy bounce. Funds can still go short and Banks long before we finally hit bottom in the prices of Gold and Silver, but either way, we have hit bottom or we have just one more dip to come.

Don’t miss a golden opportunity.

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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