COT figures reveal gold not as overbought as feared

The gold price is now being driven higher by paper markets, not Asian retail demand which is deterred by sudden higher prices. But will it last?

While last Tuesday’s Open Interest increased by 26,833 contracts, net longs of the Managed Money category only increased by 2,664 contracts. On provisional figures for Friday, open interest fell by 20,147 contracts from Tuesday, so Managed Money going into Monday is almost certainly less net long than the category was on 17 September (the previous Tuesday) when the price was $2569 — $89 lower.

The reason for concentrating on Managed Money is that it is comprised of leveraged hedge fund speculators and therefore is a good gauge of sentiment. While there are other factors, such as the October Comex gold contract running off the board, to see the price $89 higher despite net profit-taking by the hedge funds is notable.