I just wanted to pass along my thoughts on gold and what I am looking at right now.
1) We need to keep in mind that COMEX Gold Futures Open Interest is currently at 708,463 contracts, which is the highest level in over five years and since the end of the latest bull market earlier in the decade. This level increased by over 18,000 contracts since the prior report. This is very bearish as trader interest in gold still remains very elevated.
2) Here is a five year price chart of gold’s front month contract with its accompanying COT data.
I want to show the five-year COT chart, because it will become clearer to the observer that gold’s COT data has been at this cycle high position since early Summer. The COT speculative longs and commercial shorts are not very far from their historic highs from a couple months ago.
3) The all-important $1,525 level from early in the decade has proven to be the new “$850” level that has been stymieing gold’s latest move higher. Gold has fallen back below this level and it will be three months since $1,525 was hit. It is vital that gold get above $1,525 soon.
4) The GLD tonnage cannot move higher and is currently stuck at about 896 tons. These levels are a far cry from earlier in the decade when the tonnage for April 9, 2013 stood at 1,200 tons. In this latest bull run, GLD has not seen the massive inflows like we saw earlier in the decade when GLD holdings were as much as 400 tons higher.
My concern with the latest COT data is that there is not much firepower left to drive gold higher. I am concerned that as the fear of additional QE dies down, so will the desire to own gold. The speculative longs are still holding here, but if gold continues to lose air, we could see a sharp fall as traders run to the exits all at once.