Open interest contracts from 1st Jan. 2008 to 11th Feb 2010 - Gold Contracts

The chart above indicates the weekly change in open interest for spot gold over a two year period with the first week of 2008 on the far right of the chart and with last week’s open interest on the far left.  Last week’s open interest  for gold was 466,905 contracts, having fallen from the previous week’s 480,860, the fourth fall in a row from the high of mid January where the short term top was 528,924.  The broader picture for the data clearly indicates the peak which approached 600k contracts in early 2008, down to a low of 261k towards the end of 2008.  Whilst the last four weeks is a relatively short time scale, it does indicate falling open interest coupled with falling prices which could suggest that the gold bulls are either offsetting or squaring off.  This combination is usually taken as a sign of strengthening as once these positions have been squared off then the recent decline in gold prices should come to an end as the longer term bullish trend resumes.   How far this will run in the future is difficult to forecast but the 600k upper limit at least provides us with a guide for future analysis.   Our technical analysis of the spot chart has supported the view that gold is currently in a longer term bullish trend.   One further point to note from the 2 year open interest chart is the first quarter of 2008 where we saw falling open interest against a backdrop of rising gold prices which is normally considered a bearish signal and indicative of a potential reversal in the market which indeed was the case in late March when prices collapsed dramatically.  At the time many market commentators were forecasting a long bull run for gold!!

Spot gold price - Weekly from 1st Jan 2008 to 17th Feb 2010

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No real change since last week other than commercials still selling into a rising market, although the volume of contracts has substantially reduced in the futures market since this time last year.  As an example this time last year  the total number of positions was 141k whereas last week the total number was close to 95k and with commercial short positions having fallen from 100k last year to 64.5k this year.

In the spot market the trend is still bullish longer term although we are currently seeing some sideways consolidation in the market at present due to the economic climate and present round of quantitative easing and financial bail outs.   The perceived wisdom of the stock markets is that the rally of the past few weeks is merely a temporary bull rise which, in due course, is likely to classified as a dead cat bounce.  This in turn could lead investors back to gold and silver as safe havens in uncertain times.

The bullish momentum of gold seems to have remained in place with the COT index for this week showing only a minor fall back from the last two weeks, which reflects the pull back in spot gold prices. Assuming the trend continues, then we should see higher prices in gold over the next few months, and until we reach an extreme point which may indicate a longer term reversal.

COT Index Gold - 6th March 2009

The COT index for gold shows that the rally in the price of gold seems set to continue for some time yet, with last weeks data showing a slight pullback from the rally of the last few weeks, which is reflected in the spot market. The candle chart of two weeks ago provided a bearish engulfing candle with a fall this week, but this increasingly looks like a short term pullback with the moving averages acting as support. The COT index is now confirming this view, and we should see a continuation in the bull rally, with a re-test of the $1000 per ounce in the short to medium term. If you would like to see the latest spot gold price, then these are now available on the live spot gold prices chart, and we have also added an economic calendar, which provides details of all the major fundamental news announcements for the following weeks, backed up with a live news feed.

COT Index For Gold - Week Ending 20th February 2009

In the last two weeks the COT index has begun to climb heading back up from the low of 15 weeks ago which suggests that the commercial contract holders are increasingly seeing an opportunity to sell into the rising prices in spot gold, which touched $1000 per ounce on Friday, before falling back to close just below. From the above we can assume that we are some way from the peak for spot gold prices, and can therefore assume that this is another indicator that the bull trend in gold is set to continue for some time yet. Naturally once the COT index starts to approach 95 then this will be our first warning signal that the bull trend is coming to an end. For a daily update on spot gold prices please just follow the link here.

COT Index Crude Oil - 8th February 2009

Much the same as last week with the index falling, this suggests that the commercial group is expecting crude oil prices to fall further and are therefore stockpiling supplies in the hope of prices rising in the future. For a clear buying signal we need to wait for the index to reach a low of 5-10, before we can expect any significant rise in prices in the short term. If you would like to follow my daily oil prices posts then please just follow the link. This week’s data gives us little clue at the moment as the change on last week is negligible.

COT Index Gold - 28th January 2009

The COT report for this week shows the commercial traders beginning to sell into the rising trend in spot gold prices, so we should expect to see the trend continue for the short term at least, following the low of 12 weeks ago, as I have been suggesting in the spot gold prices daily report for some time.