Written by Hebba Investments
- US strikes in Syria were the big mover last week for gold and silver.
- Despite the initial jump in precious metals, Friday saw both metals give up most of their gains, with silver losing almost 2%.
- Investors that believe that US strikes in Syria are a one-off event should sell precious metals as the COT report shows speculative positioning is quite over-extended.
- We believe that strikes in Syria are the beginning of the end for a positive US-Russian relationship, and thus uncertainty will rise with precious metals.
- The Syrian situation is quite liquid so investors need to monitor it closely.
The latest Commitment of Traders (COT) report showed another increase in speculative long positions as speculators continued to load up on gold and silver. Investors need to remember that the recent COT report closed on Tuesday, which was before the major event of the week – the US missile strike in Syria.
This report will be briefer than usual as we are on travel, but we will go over the latest COT report and then give our thoughts on the implications of the US strike in Syria.
We will get more into some of these details, but before that let us give investors a quick overview into the COT report for those who are not familiar with it.
About The COT Report
The COT report is issued by the CFTC every Friday to provide market participants a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. In plain English, this is a report that shows what positions major traders are taking in a number of financial and commodity markets.
Though there is never one report or tool that can give you certainty about where prices are headed in the future, the COT report does allow the small investors a way to see what larger traders are doing and to possibly position their positions accordingly. For example, if there is a large managed money short interest in gold, that is often an indicator that a rally may be coming because the market is overly pessimistic and saturated with shorts – so you may want to take a long position.