Looking at this week’s Commitments of Traders Report, changes in speculator positioning across major currencies and commodities are limited. The only changes worth highlighting can be seen in Canadian dollar and gold positions. Following the successful conclusion of USMCA (formerly NAFTA) negotiations, speculators reduced their short positions against the Canadian dollar by a significant degree. Looking at gold, speculators reduced their long positions in the precious metal this week, causing the overall net short position to rise to a new record for 2018.

Turning to extremes in positioning, the long US dollar net position is no longer at a bullish extreme. In last week’s analysis of the COT Report, we noted that positioning in the US dollar was looking extended based on 12-month averages and the current net position relative to total interest. This week, the only speculator positions that look extended include the short Australian dollar and the short gold position. Both look extended based on the current net position when compared to 36-month averages. When the net speculator position is more than two standard deviations smaller or larger than the trailing 12-month or 36-month average, we flag the position as an extreme.

The purpose of this weekly report is to track how the speculator community is positioned across various major currencies and commodities. When net long positions become crowded in either direction, we flag extended positioning as a risk. Crowded positions do not suggest an imminent reversal, but should be considered as a significant risk factor when investing in the same direction as the crowd. This is shown below:

CFTC COT speculator positions (futures & options combined) – October 9, 2018

10-14-2018 CFTC

Source: CFTC, MarketsNow

 

Notable extremes, significant changes in weekly positions, and large net positions as a proportion of open interest are highlighted in gray above. Extremes in net positions are highlighted when speculator positioning is more than two standard deviations above trailing 1-year and 3-year averages. Weekly changes are highlighted when they are significant as a proportion of open interest. Finally, net positions as a proportion of outstanding interest are highlighted when they are large relative to historical averages. 1-year and 3-year z-scores are visually represented below:

1-year and 3-year z-scores based on net speculator positions

10-14-2018 COT graph

Source: CFTC, MarketsNow

 

Thanks to accelerating US growth and inflation over the past few quarters, markets increasingly expect the Federal Reserve to continue raising interest rates. In turn, both the US dollar and US Treasury bond yields have been surging, weighing on gold prices. As a precious metal, gold prices are sensitive to monetary policy expectations. When markets bet on higher interest rates, gold tends to weaken as a result.

This phenomenon can also be seen in speculator positioning. After net positions in gold futures and options peaked at +211,878 contracts in late March, speculators have cut their gold long positions aggressively. After moving to a net short position in early August, speculators have since increased their bets against the precious metal.

Whether or not gold continues to weaken remains to seen. While the dollar’s continued ascent is likely to continue weighing on gold prices, decelerating inflation (which tends to cause lower Treasury bond prices) is a positive factor for the precious metal. For traders looking to buy gold, we suggest waiting for a bullish trend and for more attractive entry prices. Trading ranges and trends for the precious metal are updated daily in our gold daily update.

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. MarketsNow will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

EUR/USD pressured below 1.0950 after ADP, ISM beat

EUR/USD has is trading below 1.0950, under pressure. ADP's private-sector jobs report has shown a loss of only 27,000 jobs, far better than expected. The ISM Manufacturing PMI also beat with 49.1 points.

EUR/USD News

GBP/USD battles 1.24 as UK coronavirus death toll jumps by 31%

GBP/USD is trading around 1.24 The market mood is gloomy as coronavirus continues spreading. The UK's death toll jumped by 31% to 2,352. Markets are digesting US data.

GBP/USD News

Oil prices are poor predictors of recession

Crude price movement before last five recessions are ambivalent. WTI has fallen 66% since January 7 to its lowest price in 18 years. Previous sharp drops in oil did not anticipate downturns.

Read more

Gold: USD 1600 is the major pivot level but is the retracement over?

Gold has been pulling back up since the recent low on March 16th. It's amazing to think that in these uncertain times the price fell to hit a low to USD 1451.32.

Gold News

WTI drops to $20 area after EIA reports huge increase in US crude oil stocks

Crude oil prices came under renewed selling pressure in the last hour after the weekly report published by the US Energy Information Administration (EIA) showed a huge build-up in crude oil stockpiles.

Oil News

Forex Majors

Cryptocurrencies

Signatures