Gold sales grew faster based on speculations at the end of October, making prices fall down and this precious metal decreased by real interest rates, as non-comparatory investors liquidated large positions
Managed Money, “Other” and Non-Reportable Traders sold a total of $8 billion in gold positions as per the Commitment of Traders data of CFTC between October 20 to October 27. This sale consistently reflects the recession of the fifth week, leading a total speculative exit from September 22 to September $19.5 billion
The weekly exit included a long position liquidation of $5.2 billion and a new short position of $2.8 billion
According to the categories, the sales carried out about 95% of “Other” and Non-Reportable Traders, where the “Other” category made the Gross Long Sale of $4 billion alone
Yields ignored as dollar and oil bite
This acute liquidation explains why gold prices remained stable in this period. The value of gold fell 1.6% over the inspection period, while the actual Yield of the U.S. 10-year declined 11 bases point — a macro-economic change that usually resorts to gold without Yield
Instead, the gold is 0.6% stronger. The US Dollar and 4.1% of the growing Brent crude oil got pressure. Analysts pointed out that fear of government liquidity management and dollar strengthening caused the “Other” position to open. The rolling corilation of the “Other” between Gross Long and Dollar Index (DXY) and the front-end Brent Contract remained moderate
Despite heavy sales, the market position is still challenging for gold bulls. While the net position of the Managed Money remained relatively low, the Gross Long Position of “Other” on 27th October was above the middle value of the two-years, both in the percentage of the nominational terms and open interest, making it possible forth and long liquidation
Gold weakness deepened by the end of the month, when the metal saw an additional 4.3% decline between October 27 to October 30. 3.7% increase in Brent crude oil prices in the same period completely shaded small-small reforms in the dollar and real Yield
Long degradation generated a response to the derivatives market, where changes in the options surface showed active down hedging and open bearish wildness. The three-month implication of gold increases the volatility, while the normalized 25-delta put-call sq reached the 85th percentile of a year range
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Findings for Gold traders:
In short, gold prices are still under the firmly pressure of the dollar and oil, while the continual sales of speculative large investors can continue further decline. If the long position in the “Other” class falls even more, the market may see a more rapid decline, so traders should be alert and strengthen risk management