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July 26, 2020 | Gold Hits New Record High and There’s More to Come

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Gold futures just touched $1928 taking out the Intraday high of $1923.70 in 2011.
11-Week Run Gold is on a huge 11-week run. The last time gold did that was at the 2011 high.

Is a pullback in order? A Gold COT chart says otherwise.

Gold COT Chart

Gold COT Chart Still Bullish

Understanding Futures

In the futures world there is a short for every long.

The first horizontal box has Large Specs, Small Specs, and Commercials. This is It’s Old COT reporting.

The second box distinguishes producers from the swap dealers (i.e. market makers). This is New COT reporting.

Those are the actual data links for the above chart.

Large Specs, Small Specs, Unreportable Positions

Large specs are generally hedge funds that trade futures in size. Small Specs are typically individual traders.

Sometimes small specs are called unreportable positions. If you are big enough you have to tell the CTFC what your position is.


The producers mine gold and sell it via futures. They are always short.

Swap Dealers

The Swap Dealers are commercial market makers who take the other side of the trade. They do so because as Market Makers they have to. It’s their business to make a trade.

The swap dealers are hedged. They do not much care if prices rise of fall. If that was not the case, they would be blown out of the water on big, sustained rallies. That does not imply honesty as the dealers have been caught manipulating. Rather, they manipulate if their hedges get out of balance or they see a chance to profit. The latter could be in either direction, up or down in the price of gold.


The commercials are the Swap Dealers + the Producers + the Manufacturers or Jewelry maker who buy gold to use it. It is a confusing mix which is what brought about the disaggregated reports (the New Cot reporting).

We frequently hear things like “commercials covered” their shorts or the commercials are the “smart money”.

That is nonsense. The producers don’t buy gold and the swap dealers are hedged (long gold and short equivalent futures). There is nothing “smart” about being forced to take the other side of a trade.

This subject comes up all the time.

For example, on December 27, Tom McClellan said “Gold COT Data Call for More of a Drop”

Gold was at the $1500 level.

On March 12, McClellan said Gold Moving Lower Despite Covid-19.

McClellan said “Gold prices should start trending down now, and for the next 5 years, according to this week’s chart.

Managed Money

Managed money is a way of disaggregating the Big Specs from the Commercials. Some people consider the big specs to be the “smart money” and the small specs to be the “dumb money”.

Reporting Frequency

Cot reports come out on Friday for the previous Tuesday. Thus the above chart (except for the price, reflects Tuesday, July 21.

Every week, we do not know what happened between Tuesday and Friday.

Room to Run

Analysis of the Gold COT Chart suggests there is still plenty of room left to run. Details show why.

Smart Money 2020-07-26
  • Normally, gold advances in the short- to mid-term as the big specs or managed money expands position.
  • The opposite occurs during long liquidations.

That is what prompted me to write on April 6, 2020 Gold’s New Breakout is Very Bullish: Here’s Why.

It is bullish that gold advanced with smart managed money missing most of the move. At some point FOMO kicks in.

A pullback can happen at any time, including now, but the fundamentals for further advancement: monetary printing, COTs, and of course faith in central banks are firmly in place.


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July 26th, 2020

Posted In: Mish Talk

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