Seasonal Strength Meets Conflicting COT Report—Are You In?

Gold market bulls have been riding an intense wave since the 2022 lows, when prices began trending towards the $2,000 per ounce level and finally breaking out, and the momentum hasn't let up. By July 2025, gold had an all-time high of $3,509.9, based on the nearest futures contract charts. Trading up 117% from $1,618 in October 2022. Managed Money began aggressively buying during the October 2022 lows and continued until September 2024, when gold was trading near $2,730. Later, I will assess the current Commitment of Traders (COT) report.

Hedgers, like mining companies and central banks, have also benefited. Miners like Newmont (NEM) had revenue in Q1 2025 of $5.01 billion, representing a 24.5% increase from the $4.023 billion reported in Q1 2024. Higher year-over-year realized gold prices primarily drove this increase. In 2024, central banks accumulated significant gold as part of their reserve diversification strategy amidst global economic uncertainties and currency volatility. The amount of gold stockpiled was close to 1,045 metric tonnes, according to the World Gold Council. This marked the third consecutive year in which central bank gold purchases exceeded 1,000 tonnes, a trend according to AInvest driven by geopolitical tensions, inflation risks, and a strategic retreat from the U.S. dollar. This rally has rewarded both those chasing quick profits and those shielding against economic uncertainty.

Two events point to potentially higher gold prices ahead. First, central bank purchases are set to continue, with the People's Bank of China continuing its 2024 buying spree. Reporting amounts of gold purchased by the PBOC is challenging to narrow down due to the underreporting of Chinese gold purchases, making it difficult to confirm the exact quantity definitively. Second, reports over the weekend that Federal Reserve Chair Jerome Powell will be resigning could result in much lower short-term interest rates if President Trump gets his wish of a more dovish Fed Chairman replacement. This would lead to a lower U.S. dollar and interest rates, which is bullish for gold prices.

However, one event could disappoint gold buyers: If Powell does resign and the new chairperson drastically cuts short-term interest rates, the markets may perceive this as highly inflationary due to the strength of the current economy and employment situation. Thereby raising yields on the long end of the yield curve (TLT), anticipating this uptick in inflation. This would be a headwind for gold investors/traders as gold usually underperforms in high-interest-rate environments. Speculators might face short-term losses, while hedgers could see reduced urgency for gold if U.S. dollar stability returns.

Source: Barchart

Technically, gold is still in a long-term uptrend. The weekly chart shows how gold has consistently traded over the 50-week simple moving average (SMA) since breaking above $2,000. The current bull market has been trading at extreme distances from its 50 SMA, leading to concerns that the price may need to return to its mean to correct some of the bullishness in the market. Trend followers would still respect this bullish uptrend by trading what they see the market is doing and not trying to predict what it might do.

I wish I could say that this uptrend is now in the hands of the strong hands, who manage money, but I can't. The following graphs will help explain my words.

Source: CME Group Exchange

The COT report for Managed Money shows how in 2022 the price (yellow line) put in a low and began an uptrend. As gold prices increased, each new high was met with new Managed Money buying (blue bars). However, the highs in 2024 were the last time Managed Money increased their gross long positions with each new high price in gold. Seeing the price rally and Managed Money restraining from aggressive buying has me wondering who has been doing all this new buying?

Source: CME Group Exchange

I checked the commercial traders and swap dealers, which had no buying, and then the non-reportables, and found the aggressive buyers. Unfortunately, non-reportable traders rarely have the staying power of the previously listed traders. Non-reportable does not mean they are only retail traders, but could be larger speculators trading contract sizes under the reportable level. The non-reportables have continued buying new highs in gold up to the recent all-time highs. I don't consider this a sell signal, but it does let me know that it might not take much to create a cascade in gold market prices, which could be like a vacuum as the smaller traders rush for the exits simultaneously. The non-reportables have done well pushing these prices higher, and the trend continues. I only wanted to point out this COT report issue as a yellow flag of caution. 

As I've been writing, the gold market has had a significant move, and some of the items I mentioned may cause a headwind to higher gold prices. While I firmly believe in trend following, I like to be aware of upcoming events that may impact the market I choose to trade.

Gold has historically had significant moves higher from July to early September. Moore Research Center, Inc. (MRCI) has extensively researched the gold market. Resulting in finding this potential bullish opportunity.

As a crucial reminder, while seasonal patterns can provide valuable insights, they should not be the basis for trading decisions. Traders must consider various technical and fundamental indicators, risk management strategies, and market conditions to make informed and balanced trading decisions.  

Source: MRCI

MRCI searches for profitable seasonal patterns and patterns with the least drawdown during the seasonal period (yellow box). After all, who wants to sit through a significant drawdown on the way to a potential profit? Gold has followed its seasonal 15-year pattern (blue line) fairly well since the beginning of the year. March usually sees a correction of some sort, sideways or down. The gold market has been trading sideways since then. Is it now ready to embark on its seasonal July bottom rally?

I've added the Relative Strength Index (RSI) to the seasonal chart. In uptrends, it's not unusual for markets to enter corrections and end when the RSI has retraced back to the 50% vicinity. The gold market has had three of these corrections, each seeing a bounce in price. Gold is beginning its July seasonal buying window, and the RSI has been hovering around the 50% level. Coincidence?

MRCI research has found that December gold has closed higher on approximately August 23 than on July 24 for 12 of the past 15 years, an 80% occurrence. During this time, four years never had a daily closing drawdown. During hypothetical testing, gold averaged about 47 points, $4,700 per winning trade during this seasonal window.

Source: MRCI

In the past, futures traders could participate in these moves using the standard-size contract (GC) or the micro-size (GR) contract, and equity traders could use the exchange-traded fund (ETF) symbol (GLD). Additionally, investors could purchase physical gold in the spot market.

While the GR contract is more affordable than the GC for many traders, there has still been significant demand for a smaller gold contract from the retail trading base. To answer this request, the CME Group launched a 1-ounce gold futures contract on January 13, 2025, aimed at the retail client.

Specifications for the new gold contract are:

• Contract Size: 1 ounce

• Pricing: U.S. dollars and cents per ounce

• Tick size: $0.25 (note the GC and GR contracts are $0.10)

• Trading symbol: 1OZ

• Expiration months: Feb, Apr, Jun, Aug, Oct, & Dec

• Settlement method: Cash settled

The features of the 1OZ contract allow traders to track the price of gold more accurately. The 1OZ futures are directly tied to the spot price, offering accurate market exposure.

Gold market bulls have enjoyed a remarkable run, with prices soaring 117% from $1,618 in October 2022 to an all-time high of $3,509.9 by July 2025, per futures contract charts. Central bank purchases, with 1,045 metric tonnes added in 2024 per the World Gold Council, and geopolitical tensions, like U.S.-global trade disputes, continue to drive demand. However, a potential headwind looms: a new Federal Reserve Chair in 2026 could slash short-term rates, sparking inflation fears and raising long-end yields, which historically pressure gold. Speculators face short-term risks if yields spike, while hedgers might see less need for gold if dollar stability returns. The Commitment of Traders (COT) report raises caution, showing non-reportable traders, not Managed Money, driving recent highs, per CME Group data. These smaller players, upping bets through July 2025, lack the staying power of the more capitalized managed money traders, signaling a risk of sharp sell-offs if sentiment shifts.

Seasonally, gold's July-to-early-September rally, with an 80% chance of closing higher by August 23 per Moore Research Center's 15-year data, supports bulls, especially with the Relative Strength Index near 50%, a level tied to past bounces. Yet, traders must weigh this against technical overextension, as gold trades far above its 50-week moving average. For those looking to trade, CME Group's new 1-ounce gold futures contract (1OZ), launched January 13, 2025, offers retail traders a cash-settled, affordable way to track spot prices, complementing standard (GC) and micro (GR) contracts. Speculators can capitalize on volatility, while hedgers gain precise exposure to protect against economic uncertainty. Despite risks, the trend remains bullish, but traders should monitor COT shifts and changes to the Fed Chair position to navigate potential corrections.

On the date of publication, Don Dawson did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com