Russia Does Something It Has Not Done In 2 Years With Its Gold Reserves As Speculators Remain Uncertain On Gold

Summary

• Speculators added to both their long and short positions in gold during the past week.
• The result was a second-straight week of increases in the gold net long positions.
• Despite the increase, the gold net long position remains fairly low compared to its historical average.
• The Russian central bank decided not to purchase any gold in December for the first time since early 2015.
• The short-term gold picture may be slightly bearish, but long-term we remain very bullish.

The latest Commitment of Traders (NYSE:COT) report showed another positive week for gold as the net long position increased for the second straight week. We saw an increase in both long and short positions as speculators remained uncertain regarding gold direction after the strong rally to start the year.

We also saw the latest gold reserve report from Russia and it was certainly interesting. In the month of December Russia purchased no gold, which was the first time since early 2015 that they didn't choose to add to their gold reserves.

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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