Gold Trader Computer Screen

How to Trade Gold

Gold Report

Has anyone every told you how to trade gold or silver before?

See below for a quick introduction.  I will provide general ideas to start with and in time we will be able to explore them further.  It starts with the Commitment of Traders (COT) Report that comes out every Friday after close.

COT Report is courtesy Quandl:

COT Report

Link: https://www.quandl.com/data/CFTC/088691_FO_L_ALL-Commitment-of-Traders-GOLD-CMX-Futures-and-Options-Legacy-Format-088691

Research the terms in bold, such as Open Interest and Short Position, also note that the yellow open interest line above is located on the Econ Circus Gold Report page.  When you click on the link above and go to the Quandl Database you will be able to select various trade data.  I recommend selecting Commercial Short (purple line) and Non-Commercial Short (green line), per above.

Hint: “Commercials” refer to the bullion banks often called “smart money,” while “Non-Commercials” are the non-bullion banks, known as the “dumb money.”

Review the COT Report and compare it to the price of gold.  You can do this for free on a variety of websites.  I prefer https://stockcharts.com/.

Hint: On Stockcharts, go to symbol “$GOLD” so that you can begin charting the gold price.  Turn the period to weekly and review the last 5 years.  The goal is to look at the gold price and compare it to the COT Report, but before you do that you should be familiar with general “rules of trading.”

Trading rules

Link and Article: https://www.investopedia.com/articles/technical/02/112002.asp

Hint: Keep in mind that December 1st, 2015 was a good time to buy gold and that July 4th, 2016 was a good time to sell gold.  See if you can infer anything or notice any patterns already.

Lastly, consider that when the mainstream media and economists talk about gold they will use vague absurdities such as a fear trade or cite interest rates, the dollar and the Fed.  This is wrong because if you run the data between interest rate and gold, you’ll see that there is no strong positive correlation.  The reality is that the price of gold is controlled by the bullion banks so that is what you should be following, and all other predictions should be taken with a grain of salt.  There are numerous videos on YouTube that will talk about gold price manipulation and there are a few campaigns that are trying to stop this.  The takeaway is that if you can understand how to read the COT Report then you will be in a better position than most financial “experts” who don’t.

Good luck and have fun with it; we’ve barely scratched the surface!

EC

 

 

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