As promised here’s my take on Gold. But before we get busy analyzing, I’d like to present the way I go on about my trading. So, I learned the ropes from Steve Briese and Larry Williams. I’m sure you’ve read their books. Since I don’t trust in charting services, I constructed the indicators presented in Williams’ books by myself. I use an Excel sheet and it looks something like this.
There’s nothing fancy there, only the basic tools.
- Commercial & Non-Commercial Net positions for the last 3 years.
- COT Comm & Non- Comm Index (3 years)
- COT Comm Movement Index
- Comm Long & Short + Open Interest chart.
- Comm Long & Short / OI chart
- Willco Indicator (1,5 years) (was pretty difficult to figure out the formula)
Okay, enough of my method. Let’s get to work.
Gold
It’s pretty obvious that we are at a major support zone. The price hit the 1180 level 3 times so far, each hit met with less Commercial buying & Non-Commercial selling.
Since Funds are fueling the moves, that means that they still have some bullets to spare to take the trend lower.
The COT Index readings are below extreme levels on both sides (10 ; 90)
Same with Movement Index.
It’s important to note that overall OI has been declining in 2014. Low OI readings are usually symptoms of a bottom. Commercials have been buying heavily into the decline, increasing their longs compared to OI from 35% to 40 % while reducing their shorts from 65% to 50%. (Bullish sign again)
If we take a look at Willco (CP / OI Index), it tells us that Commercials are favoring the long side (net 75% long compared to the last 1,5 years).
Bottom line is: I’m staying flat since COT Index remains neutral. That means that the Funds can take the price below that level.