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.

As with silver the futures’ positions of the Commercials shows an expectation of further increases in the price of gold, a position which is likely to remain unchanged until we reach an extreme on the COT index approaching anywhere close to 100, assuming the current trend continues to build as we have seen over the past 20 weeks.   Again I must emphasise that this index is not a timing tool but merely reflects the sentiment of some of the biggest market players and you trade against them at your peril.

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 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.