All Eyes On The Fed Today

All Eyes On the Fed

All eyes will be on the Federal Open Market Committee as it finishes its two-day meeting today. No rate is expected at 2 pm when their statement is to be released.

In other news, The Bank of Japan said yesterday that they expect to keep rates low for the foreseeable future. The BOJ’s decision helps the Fed keep a less aggressive position even though two rate hikes are still planned for Sept and Dec.

The FOMC FED Watch tool predicts a 97 percent chance for a rate hike in September and a 69 percent chance for another rate hike in December.

What I find interesting is according to the most recent commitment of traders report (see below ) illustrating how large the short position is, any unexpected dovish statement from the FED today could create a strong move to the upside in the price of Gold.

GOLD – COMMODITY EXCHANGE INC.                                          Code-088691
Non-Commercial Commercial Total Nonreportable Positions
Long Short Spreads Long Short Long Short Long Short
220,620 172,023 58,618 162,640 228,308 441,878 458,949 54.742 37,671


I’m sure there will be people who read this comment and argue, how can you predict a short covering rally in the price of Gold when the commitment of traders report is showing 220,620 contracts long and a net long position of 58,618 contracts?

Historically funds keep long positions. The next chart below will illustrate how many short positions have been added or longs who left the market since April 6, 2018. This will give you some understanding why people are reporting that this market is oversold.

CFTC Gold speculative net positions
Release Date Time Actual Previous
Aug 3, 2018 15:30 48.6K
Jul 27, 2018 15:30 48.6K 57.8K
Jul 20, 2018 15:30 57.8K 81.4K
Jul 13, 2018 15:30 81.4K 78.3K
Jul 09, 2018 15:30 78.3K 76.7K
Jun 29, 2018 15:30 76.7K 96.5K
Jun 22, 2018 15:30 96.5K 120.2K
Jun 15, 2018 15:30 120.2K 111.4K
Jun 08, 2018 15:30 111.4K 115.1K
Jun 01, 2018 15:30 115.1K 91.0K
May 25, 2018 15:30 91.0K 92.4K
May 18, 2018 15:30 92.4K 107.4K
May 11, 2018 15:30 107.4K 106.8K
May 04, 2018 15:30 106.8K 136.6K
Apr 27, 2018 15:30 136.6K 163.1K
Apr 20, 2018 15:30 163.1K 155.4K
Apr 13, 2018 15:30 155.4K 166.6K
Apr 06, 2018 15:30 166.6K 203.4K

Just a note: I went as far back as the April 6TH COT report, because that was the last high reached on April 11th in the price of Gold at the $ 1365 level. Since then the market sold off.

Since April 6th. the Commitment of traders long position has been reduced by over 150,000 contracts. Historically if you go back a bit you will see that the July 27 reporting date position of only 48.6 k net long contracts is unusually low. One cannot expect this information to give you a clear cut understanding on the next move in the price of Gold. It’s only a used as a tool to help traders and investors try to understand what the market participants are thinking.

Have a wonderful Wednesday.