These Three Major Events Loom Large Next Week For Gold As Speculative Traders Cut Gold Positions

Summary

• Speculative gold traders cut both long and short positions for the week signifying a lack of confidence in the direction of gold.
• Chinese markets are closed next week so investors should expect higher than normal volatility due to less liquidity in markets.
• The Federal Reserve Board meets next week for the first time in 2017 and despite no expectation of a change in rates, their statement should move markets.
• Next week also marks the first issuance of the US Initial Claims report and this is also another potential gold catalyst that could move markets.
• We expect next week will be a positive one for gold but investors should expect a bit of a rocky ride getting there due to the increased volatility.

The latest Commitment of Traders (COT) report showed a drop in both speculative longs and shorts for the week as gold meandered to end the COT week (Tuesday to Tuesday) essentially unchanged. The increase in speculative "spreading" positions but drop in both long and short positions, suggests that traders remain very uncertain about the next move in gold.

That may not be very surprising as next week brings three big events for gold traders. The first event, the Chinese New Year, has been a negative catalyst for gold in the past as some theorize that traders take advantage of closed Chinese markets to make major moves in gold. We would not put past traders to play in China's sparsely traded markets (after all they were caught red-handed earlier), so investors need to be prepared.

The second major event next week is the upcoming Federal Reserve Board meeting. Even though there is little chance they raise rates, the key will be what their post-meeting statement suggests about rates looking forward. Finally, next week contains the first Friday of the new month so that means the US Initial Jobless Claims report comes out, and if the past is an indicator, this certainly has the ability to move gold markets.

We will get more into some of these details but before that let us give investors a quick overview into the COT report for those who are not familiar with it.