After reaching a relatively frothy net speculative long position of over 165,000 contracts as of the August 12th Commitments of Traders report (CoT), gold speculators have capitulated over the past three weeks by cutting their net long exposure by over 60,000 contracts – here are the last 3 CoT reports presented in chronological order:

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The most interesting aspect of the recent Cot data is the sizeable increase in the large speculator short position (over 30,000 contracts in the last three weeks). This is an indication that the hot money (hedge funds & CTAs) is betting on a further decline in the gold price in the near future. Should the downside momentum stall over the coming weeks these recent “momentum shorts” will become a natural bid in the market as they lose patience and cover their short positions.