Is the gold correction done?

Looking at last Tuesday’s Commitment of Traders numbers, we see that gold is no longer overbought. I assess the possibility that the correction is over, and does it matter?

For traders caught on the hop, recent moves in good and silver have been brutal. From an all-time high of $2790 on 30 October, gold fell by nearly 9% in 13 trading sessions to last Wednesday’s low. The fall in silver was even more brutal, amounting to nearly 15% top to bottom. In today’s trading session however, there has been some recovery, notably in Asian trading hours which is encouraging, particularly given that there has been little change in dollar bond yields and the dollar’s trade-weighted index.

Nevertheless, this recovery feels only technical so far. Some commentators will say that Biden granting permission for Ukraine to use long-range missiles to strike deep inside Russia is behind gold’s recovery overnight. There is likely to be some truth in this. But by provoking WW3, the move is scarcely believable. We wait to see if back-channel communications with Russia lead to this permission given by a president not in command of his senses is countermanded by more level heads.

On the positive side for gold, it does appear from the COT figures to no longer be overbought, at least as regards hedge fund positioning: