Top Advisors Corner

Tim Taschler: Gold Update & COT Report


Gold has struggled after peaking at 1566 in late August. Since that point, peak gold has been in a slow chop lower, as this daily chart shows:

Source:, 12/4/19

During this period, large speculators have held most of their record long positions, while commercials have held most of their record shorts, as this chart courtesy of Software North shows:

Source: Software North, 12/4/19

Looking at a weekly chart, one can see that gold rallied right up to horizontal resistance and then began to correct:

Source:, 12/4/19

What I find interesting looking at this chart is that gold rallied 32% from the December 2015 low to the mid-2016 high. During that period, commercials ramped their short position up to what was then a new record short. Looking at this most recent move, gold has again rallied 32% to its August peak, while commercials bested their record short position from 2016 by a smidge. What we don't know is how big of a correction might be in store for the yellow metal. After the 2016 peak, gold corrected 18.75%. Granted, history doesn't always repeat, but it does often rhyme. If gold trades as it did after the 2016 episode, 18.75% takes it back to the 1300 level. Time will tell.

Questions and comments are always welcome:

Tim Taschler, CMT

Sprott USA

Past performance does not guarantee future results. The views and opinions expressed herein are those of the author's as of the date of this commentary and are subject to change without notice. This information is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service nor a recommendation or determination by Sprott Global Resource Investments Ltd. that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the objectives of the investor, financial situation, investment horizon and their particular needs. This information is not intended to provide financial, tax, legal, accounting or other professional advice, since such advice always requires consideration of individual circumstances. The products discussed herein are not insured by the FDIC or any other governmental agency, are subject to risks, including a possible loss of the principal amount invested.

Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors, as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc., several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S.. Low-priced securities can be very risky and may result in the loss of part or all of your investment. Because of significant volatility, large dealer spreads and very limited market liquidity, typically you will not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks. You should carefully consider whether trading in low-priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates and others may hold positions in the securities it recommends to clients and may sell the same at any time. The author received no compensation for writing this article.

Subscribe to Top Advisors Corner to be notified whenever a new post is added to this blog!
comments powered by Disqus