Gold is bullish but appears overbought

The COT figures indicate that gold has become overbought, which is hardly surprising given the run it has had. But as a guide to prospective price performance, it is too simplistic.

The Commitment of Traders numbers showed that as of last Tuesday, gold was moderately overbought at net long 177,915 contracts, as the chart below of the net Managed Money category indicates:

The dotted line is the average position long-term, which we can take to be neutral, i.e. neither overbought nor oversold. But since last Tuesday, Open Interest has increased by over 20,000 contracts, suggesting that the Managed Money net position is getting close to net long 200,000. In the last eighteen years, this level was first breached in the 2009—2011 bull market and three times since.

Should gold bulls be worried?