Commitment of Traders Report Does Not Support Gold's Decline... Will the Rally Return?

The Commitment of Traders (COT) report issued by the U.S. Commodity Futures Trading Commission on October 16, covering data through October 13, indicated that the recent decline in gold prices since August was accompanied by stable open interest and declining trading volumes, according to an analysis by MarketPulse, a website affiliated with OANDA.

This means that the Commitment of Traders data did not support the price decline, which may point to a potential shift in market sentiment at a time when the general trend for gold has remained bullish since 2023.

The analysis views the decline from a peak near $5,600 inside a descending channel as a "bull flag" within the long-term uptrend, a technical pattern that indicates the potential resumption of the rise following the correction.

This scenario is supported by U.S. inflation data at 3.7% in September, with an 82.8% probability of holding interest rates unchanged at the October 28 meeting and a likelihood of a rate hike in December, keeping gold caught between monetary policy pressures and safe-haven demand support.

What Do These Terms Mean?

Commitment of Traders (COT) Report: A weekly report issued by the U.S. Commodity Futures Trading Commission showing the size of long and short positions in futures markets.

Open Interest: The number of futures contracts that have not yet been closed, used to measure the volume of activity and direction of liquidity in the market.

Bull Flag: A technical pattern formed after a sharp drop followed by sideways trading, indicating the potential resumption of the rise.

FedWatch Tool: A tool that measures traders' expectations for interest rate decisions based on futures contract prices.