How Gold Investors Should Play The Upcoming Big Economic News Week

July 2, 2017

Summary

  • COT speculative positions are now at very attractive levels for entry in both gold and silver

  • Despite a bullish COT report, physical demand in gold and silver is very weak

  • Asian gold premiums also remain lackluster

  • Next week is a big week with the ADP and Nonfarm Payrolls report that has been big movers of precious metals in the past

  • Weighing both sides means we are neutral gold and silver but would be buyers on any drop next week

The latest Commitment of Traders (COT) report showed a third straight week of speculative long selling in gold despite an actual rise in price during the week, which is a bit unusual. The addition of new shorts also helped take the net speculative long position in gold down below the 100,000 contract mark for the first time in a month – which is good from a contrarian point of view.

Big economic events loom next week as the market receives the ADP employment and Nonfarm Payrolls reports. In the past these have been some of the biggest movers of the gold market, and with the Fed still expected to raise rates twice more this year (we don’t buy it), weakness or strength in these reports will help confirm or reverse the Fed’s projected interest rate trajectory.

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.

About The COT Report
The COT report is issued by the CFTC every Friday, to provide market participants a breakdown of each Tuesday's open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. In plain English, this is a report that shows what positions major traders are taking in a number of financial and commodity markets.

Though there is never one report or tool that can give you certainty about where prices are headed in the future, the COT report does allow the small investors a way to see what larger traders are doing and to possibly position their positions accordingly. For example, if there is a large managed money short interest in gold, that is often an indicator that a rally may be coming because the market is overly pessimistic and saturated with shorts - so you may want to take a long position.

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China is the world’s biggest gold producer with more than 355 tons annually. Australia is second.