Seasonal Strength Meets Conflicting COT Report—Are You In?

Gold market bulls have been driving an intense wave for the reason that 2022 lows, when costs started trending in the direction of the $2,000 per ounce degree and at last breaking out, and the momentum hasn’t let up. By July 2025, gold had an all-time excessive of $3,509.9, primarily based on the closest futures contract charts. Buying and selling up 117% from $1,618 in October 2022. Managed Cash started aggressively shopping for through the October 2022 lows and continued till September 2024, when gold was buying and selling close to $2,730. Later, I’ll assess the present Dedication of Merchants (COT) report.

Hedgers, like mining corporations and central banks, have additionally benefited. Miners like Newmont (NEM) had income in Q1 2025 of $5.01 billion, representing a 24.5% enhance from the $4.023 billion reported in Q1 2024. Increased year-over-year realized gold costs primarily drove this enhance. In 2024, central banks gathered vital gold as a part of their reserve diversification technique amidst international financial uncertainties and forex volatility. The quantity of gold stockpiled was near 1,045 metric tonnes, in response to the World Gold Council. This marked the third consecutive yr during which central financial institution gold purchases exceeded 1,000 tonnes, a pattern in response to AInvest pushed by geopolitical tensions, inflation dangers, and a strategic retreat from the U.S. greenback. This rally has rewarded each these chasing fast earnings and people shielding in opposition to financial uncertainty.

Two occasions level to doubtlessly increased gold costs forward. First, central financial institution purchases are set to proceed, with the Folks’s Financial institution of China persevering with its 2024 shopping for spree. Reporting quantities of gold bought by the PBOC is difficult to slim down as a result of underreporting of Chinese language gold purchases, making it tough to substantiate the precise amount definitively. Second, experiences over the weekend that Federal Reserve Chair Jerome Powell can be resigning might lead to a lot decrease short-term rates of interest if President Trump will get his want of a extra dovish Fed Chairman substitute. This might result in a decrease U.S. greenback and rates of interest, which is bullish for gold costs.

Nevertheless, one occasion might disappoint gold consumers: If Powell does resign and the brand new chairperson drastically cuts short-term rates of interest, the markets could understand this as extremely inflationary as a result of energy of the present financial system and employment scenario. Thereby elevating yields on the lengthy finish of the yield curve (TLT), anticipating this uptick in inflation. This might be a headwind for gold traders/merchants as gold normally underperforms in high-interest-rate environments. Speculators would possibly face short-term losses, whereas hedgers might see diminished urgency for gold if U.S. greenback stability returns.

Supply: Barchart

Technically, gold continues to be in a long-term uptrend. The weekly chart exhibits how gold has persistently traded over the 50-week easy shifting common (SMA) since breaking above $2,000. The present bull market has been buying and selling at excessive distances from its 50 SMA, resulting in considerations that the value could have to return to its imply to appropriate a number of the bullishness out there. Pattern followers would nonetheless respect this bullish uptrend by buying and selling what they see the market is doing and never attempting to foretell what it would do.

I want I might say that this uptrend is now within the palms of the robust palms, who handle cash, however I am unable to. The next graphs will assist clarify my phrases.

Supply: CME Group Alternate

The COT report for Managed Cash exhibits how in 2022 the value (yellow line) put in a low and commenced an uptrend. As gold costs elevated, every new excessive was met with new Managed Cash shopping for (blue bars). Nevertheless, the highs in 2024 have been the final time Managed Cash elevated their gross lengthy positions with every new excessive worth in gold. Seeing the value rally and Managed Cash restraining from aggressive shopping for has me questioning who has been doing all this new shopping for?

Supply: CME Group Alternate

I checked the business merchants and swap sellers, which had no shopping for, after which the non-reportables, and located the aggressive consumers. Sadly, non-reportable merchants not often have the endurance of the beforehand listed merchants. Non-reportable doesn’t imply they’re solely retail merchants, however may very well be bigger speculators buying and selling contract sizes below the reportable degree. The non-reportables have continued shopping for new highs in gold as much as the current all-time highs. I do not take into account this a promote sign, but it surely does let me know that it won’t take a lot to create a cascade in gold market costs, which may very well be like a vacuum because the smaller merchants rush for the exits concurrently. The non-reportables have completed properly pushing these costs increased, and the pattern continues. I solely wished to level out this COT report problem as a yellow flag of warning. 

As I have been writing, the gold market has had a major transfer, and a number of the gadgets I discussed could trigger a headwind to increased gold costs. Whereas I firmly imagine in pattern following, I like to concentrate on upcoming occasions that will influence the market I select to commerce.

Gold has traditionally had vital strikes increased from July to early September. Moore Analysis Middle, Inc. (MRCI) has extensively researched the gold market. Leading to discovering this potential bullish alternative.

As a vital reminder, whereas seasonal patterns can present invaluable insights, they shouldn’t be the idea for buying and selling selections. Merchants should take into account varied technical and basic indicators, threat administration methods, and market situations to make knowledgeable and balanced buying and selling selections.  

Supply: MRCI

MRCI searches for worthwhile seasonal patterns and patterns with the least drawdown through the seasonal interval (yellow field). In spite of everything, who needs to take a seat via a major drawdown on the best way to a possible revenue? Gold has adopted its seasonal 15-year sample (blue line) pretty properly for the reason that starting of the yr. March normally sees a correction of some type, sideways or down. The gold market has been buying and selling sideways since then. Is it now able to embark on its seasonal July backside rally?

I’ve added the Relative Power Index (RSI) to the seasonal chart. In uptrends, it is commonplace for markets to enter corrections and finish when the RSI has retraced again to the 50% neighborhood. The gold market has had three of those corrections, every seeing a bounce in worth. Gold is starting its July seasonal shopping for window, and the RSI has been hovering across the 50% degree. Coincidence?

MRCI analysis has discovered that December gold has closed increased on roughly August 23 than on July 24 for 12 of the previous 15 years, an 80% incidence. Throughout this time, 4 years by no means had a day by day closing drawdown. Throughout hypothetical testing, gold averaged about 47 factors, $4,700 per successful commerce throughout this seasonal window.

Supply: MRCI

Prior to now, futures merchants might take part in these strikes utilizing the standard-size contract (GC) or the micro-size (GR) contract, and fairness merchants might use the exchange-traded fund (ETF) image (GLD). Moreover, traders might buy bodily gold within the spot market.

Whereas the GR contract is extra inexpensive than the GC for a lot of merchants, there has nonetheless been vital demand for a smaller gold contract from the retail buying and selling base. To reply this request, the CME Group launched a 1-ounce gold futures contract on January 13, 2025, aimed on the retail consumer.

Specs for the brand new gold contract are:

• Contract Dimension: 1 ounce

• Pricing: U.S. {dollars} and cents per ounce

• Tick measurement: $0.25 (observe the GC and GR contracts are $0.10)

• Buying and selling image: 1OZ

• Expiration months: Feb, Apr, Jun, Aug, Oct, & Dec

• Settlement technique: Money settled

The options of the 1OZ contract permit merchants to trace the value of gold extra precisely. The 1OZ futures are instantly tied to the spot worth, providing correct market publicity.

Gold market bulls have loved a exceptional run, with costs hovering 117% from $1,618 in October 2022 to an all-time excessive of $3,509.9 by July 2025, per futures contract charts. Central financial institution purchases, with 1,045 metric tonnes added in 2024 per the World Gold Council, and geopolitical tensions, like U.S.-global commerce disputes, proceed to drive demand. Nevertheless, a possible headwind looms: a brand new Federal Reserve Chair in 2026 might slash short-term charges, sparking inflation fears and elevating long-end yields, which traditionally stress gold. Speculators face short-term dangers if yields spike, whereas hedgers would possibly see much less want for gold if greenback stability returns. The Dedication of Merchants (COT) report raises warning, exhibiting non-reportable merchants, not Managed Cash, driving current highs, per CME Group information. These smaller gamers, upping bets via July 2025, lack the endurance of the extra capitalized managed cash merchants, signaling a threat of sharp sell-offs if sentiment shifts.

Seasonally, gold’s July-to-early-September rally, with an 80% probability of closing increased by August 23 per Moore Analysis Middle’s 15-year information, helps bulls, particularly with the Relative Power Index close to 50%, a degree tied to previous bounces. But, merchants should weigh this in opposition to technical overextension, as gold trades far above its 50-week shifting common. For these seeking to commerce, CME Group’s new 1-ounce gold futures contract (1OZ), launched January 13, 2025, gives retail merchants a cash-settled, inexpensive technique to monitor spot costs, complementing customary (GC) and micro (GR) contracts. Speculators can capitalize on volatility, whereas hedgers achieve exact publicity to guard in opposition to financial uncertainty. Regardless of dangers, the pattern stays bullish, however merchants ought to monitor COT shifts and adjustments to the Fed Chair place to navigate potential corrections.

On the date of publication, Don Dawson didn’t have (both instantly or not directly) positions in any of the securities talked about on this article. All info and information on this article is solely for informational functions. This text was initially printed on Barchart.com