Seasonal strength meets conflicting COT reports – are you?

The Gold Market Bulls have since its 2022 low, and have finally erupted, with prices beginning to rise towards $2,000 per ounce, and their momentum has not waned. By July 2025, Gold was a record high of $3,509.9 based on the nearest futures contract chart. This is up 117% from $1,618 in October 2022. Managed Money began actively purchasing during its October 2022 low, with gold trading nearly $2,730 until September 2024. We will then evaluate the current commitment of the Trader (COT) report.

Hedgers benefit from mining companies and central banks. Miners like Newmont (NEM) earned $50.1 billion in revenue in the first quarter of 2025, up 24.5% from the $4.023 billion reported in the first quarter of 2024. In 2024, the central bank accumulated important gold as part of its reserve diversification strategy amid global economic uncertainty and currency volatility. According to the World Gold Council, the amount of gold stockpiled has reached nearly 1,045 metric tons. This is the third consecutive year in which central banks’ gold purchases exceed 1,000 tonnes, a trend based on geopolitical tensions, inflation risks and investments driven by strategic withdrawal from the US dollar. The rally rewards both people chasing quick profits and parents for economic uncertainty.

The two events indicate that gold prices could rise in the future. First, the central bank purchases are expected to continue, and the People’s Bank of China continues its purchase in 2024. Reports of gold purchased by PBOCs are difficult to narrow down due to underreporting Chinese gold purchases, and it is difficult to clearly confirm the exact amount. Second, we report that Federal Reserve Chairman Jerome Powell could resign over the weekend. This leads to a drop in interest rates and bullish US dollars for gold prices.

However, one event can disappoint gold buyers. If Powell resigns and the new chairman cuts short-term interest rates significantly, the market could recognize this as highly inflationary due to the current economy and the strength of the employment situation. This increases yields at the long edge of the yield curve (TLT) and predicts this increase in inflation. This is a headwind for gold investors/traders as they typically perform poorly in high profit environments. Speculators can face short-term losses, but hedgers can see a decline in urgency over gold if the US dollar is restored.

Source: BarChart

Technically, gold is still on a long-term uptrend. The weekly chart shows how gold has been consistently traded on a 50-week Simple Moving Average (SMA) since it broke above $2,000. The current bull market is trading at an extreme distance from 50 SMA, leading to concerns that prices will need to return to averages to correct some of the bullish market. Trend followers will respect this bullish upward path by exchanging what the market is doing and not trying to predict what it will do.

I wish this upward trend is now in the hands of strong money management, but I can’t. The following graph helps to explain my words.

Source: CME Group Exchange

The managed money COT report shows how prices (yellow line) began to go low in 2022 and began to rise. As the price of gold rose, the new best best manager money purchases (blue bars) were filled. However, the 2024 high was the last time managed money increased its total long position with each higher price of gold. Seeing prices rise, do you wonder who is making all of this new purchases by managing funds that curb aggressive purchases?

Source: CME Group Exchange

I checked commercial traders and swap dealers who hadn’t made any purchases, then checked non-reporters to find offensive buyers. Unfortunately, unreportable traders rarely have the lasting power of previously listed traders. Unreportable doesn’t mean they’re retailers alone, they could be bigger speculators who trade contract sizes at a reportable level. Non-reporters continue to buy new highs in gold to the most recent all-time high. I don’t consider this a sales signal, but it lets me know that it may not take much time to create a cascade of gold market prices. Non-reporters have pushed these prices higher and the trend continues. I just wanted to point out this issue of COT report as a yellow flag.

As I write, there is a big movement in the gold market, and some of the items I mentioned can cause headwinds towards rising gold prices. I’m a firm believer in trend following, but I like to know upcoming events that may affect the markets I have chosen to trade.

Gold has historically been a major trend from July to early September. Moore Research Center, Inc. (MRCI) is a comprehensive study of the gold market. As a result, we found this potential bullish opportunity.

As an important reminderSeasonal patterns can provide valuable insights, but are not the basis for trading decisions. Traders should make informed and balanced trading decisions taking into account a variety of technical and basic indicators, risk management strategies and market conditions.

Source: MRCI

MRCI searches for beneficial seasonal patterns and patterns with minimal drawdowns during seasonal periods (yellow box). After all, who wants to make a significant drawdown on the way to potential profits? Gold has followed the seasonal 15-year pattern (blue line) quite often since the beginning of the year. March usually shows some sort of corrections on the side or bottom. Since then, the gold market has been trading sideways. Ready to start a bottom rally for the July season?

Relative Strength Index (RSI) has been added to the seasonal chart. With uptrends, it is not uncommon for the market to correct and close when the RSI returns to near 50%. There are three of these fixes in the gold market, each of which sees a price bounce. Gold has launched its July seasonal purchase window, with RSI hovering at a 50% level. A coincidence?

A survey by MRCI found that December’s gold has been closed, with an outbreak of about 80% over the 12 years of the past 15 years, compared to July 24th and August 24th. During this period, there were no daily deadline drawdowns for four years. During the hypothesis test, gold averaged around 47 points during this season’s window, and $4,700 per winner’s deal.

Source: MRCI

In the past, futures traders can take part in these moves using standard size contracts (GC) or micro size (GR) contracts, while stock traders can use the Exchange-Traded Fund (ETF) symbol (GLD). Additionally, investors can purchase physical gold in spot markets.

GR contracts are more affordable for many traders than GC, but there was still a great demand for small gold contracts from retail trading bases. To answer this request, the CME Group launched a 1-ounce gold futures contract on January 13, 2025, targeting retail clients.

The specifications for the new Gold Contract are as follows:

• Contract size: 1 oz

• Price: US dollars and cents per ounce

• Tick size: $0.25 (GC and GR contract is $0.10)

• Trade Symbol: 1oz

• Expiration dates: February, April, June, August, October, December

• Payment method: Cash has been settled

The 1OZ contract feature allows traders to track gold prices more accurately. One ounce of futures are directly linked to spot prices and are exposed to accurate markets.

The Gold Market Bulls enjoyed an incredible run, with prices rising 117% from $1,618 in October 2022 to a record high of $3,509.9 by July 2025. Central bank purchases added 1,045 meters of tonnes per World Gold Council in 2024, and geopolitical tensions like the US global trade dispute continue to drive demand. But there are potential headwinds looming. The new Federal Reserve Chair in 2026 was able to cut short-term rates, raise inflation fears and raise long-term yields that historically put gold pressure on them. Speculators face short-term risks when they rain spikes, but hedgers may seem less needed for gold if dollar stability returns. Traders (COT) report commitments attract attention and show unreportable traders, not managing money, not driving recent highs, for each CME group data. These small players, who will bolster their bets through July 2025, lack the lasting power of a more capitalized managed money trader, indicating the risk of a sudden sale if sentiment changes.

Seasonally, Gold’s July-July September rally could rise by 80% by August 23rd for every 15-year data from the Moore Search Center, particularly supporting the Bulls with levels related to past bounces, with nearly 50% and relative strength indexes. However, since gold trading is far above the 50-week moving average, traders need to weigh this against technical overexpansion. For those considering trading, CME Group’s new 1-ounce gold futures contract (1OZ), launched on January 13, 2025, offers retailers a cash-setting, affordable way to track spot prices, complementary standard (GC) and micro (GR) contracts. While speculators can take advantage of volatility, hedgers acquire accurate exposure to protect against economic uncertainty. Despite the risks, the trend remains bullish, but traders should monitor COT shifts and changes to the Fed chair position to navigate potential fixes.

On the date of publication, Don Dawson had no position (directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published barchart.com