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COT: Gold Prices Entice Large Speculators, Australian & Canadian Dollar Longs Grow

COT: Gold Prices Entice Large Speculators, Australian & Canadian Dollar Longs Grow

What’s inside:

  • Canadian dollar large speculators continue to build long after unwinding from record short
  • Australian dollar large specs increase net-long position for 6th week in a row as it breaks range
  • Gold longs increase for first time since June from a low level, may set up for a break of 2011 trend-line at some point

Check out the Q3 Forecasts for our outlook on currencies, commodities, and equity indices.

Every Friday the CFTC releases the Commitment of Traders (COT) report, which shows futures traders’ positioning as it stands for the week ending on Tuesday. In the table below are the net positions of large speculators (i.e. hedge funds, CTAs, etc.); the change in their positioning from the prior week and where the net position stands compared to its 52-week range.

Noteworthy developments

Gold – Large specs in gold futures have primarily been sellers in the past three months, bringing their net-long position down to the low-end of the range over the past 10-yr+ period. The most recent report showed an increase in longs for the first time since early June. The precious metal is trading around the widely-watched 2011 trend-line, and on that with positioning relatively small compared to other times in recent years, we could finally see a drive higher above the bull/bear line-in-the-sand. A strong weekly close above the trend-line and move beyond the June high at 1296 will be our cue to look for a broader rally to develop. But the key will be for gold to clearly exceed these hurdles before becoming overly bullish.

Gold: Weekly

Canadian dollar – As CAD continues to steam-roll on ahead, so does the unwind from a record short position held by large speculators to a long position. At the time (in May), we noted that the extreme positioning profile set the Canadian dollar up for a rally. It’s been an aggressive rally, and with USDCAD nearing a trend-line extending back to September 2012 the unwind from short to a net long position in CAD may soon be put in reverse should we see the long-term threshold support the US dollar versus the Canadian currency.

Australian dollar – Large speculators in AUD have increased their net long for a 6th week in a row, bringing the total number of contracts held (56k) to just shy of the largest position since April of last year (59k). A build-up of longs from here beyond 59k would take net longs to the largest position in over four years. Positioning in the past year+ has been volatile as the Australian dollar was in search of a direction from its trading range. Now that it is broken free perhaps more upside will follow along with an increase in the number of trend-followers also jumping onboard the trend.

The COT report is a longer-term sentiment indicator – for a short-term view on sentiment, check out IG Client Sentiment data.

Other futures contracts and large speculator positioning:

Paul conducts webinars every week from Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of all upcoming live events.

---Written by Paul Robinson, Market Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.