Commercial COT Index extremes showed the Australian dollar at 97%, natural gas at 94% and palladium at 85%, all near the top of their 26-week ranges. Large speculators were net short AUD at -44,455 after a -296 weekly shift as price fell 0.10%; in natural gas they were net short -197,932 with a +5,571 improvement as price rose 2.97%; and in palladium they were net short -4,824 after -426 as price jumped 6.83%. The euro also screened high at 78% with specs net short -36,352, improving by +22,736 while price slipped 0.86%, while the Canadian dollar printed 72% as specs stayed net short -121,522 but improved by +36,644 even as price fell 1.04%. WTI crude sat at 63% with specs net long +123,449, up +1,359, while price dropped 3.69%.
At the low end, gold and silver both registered a 0% COT Index. Specs were net long gold at +243,334, adding +21,145 as price declined 3.38%, and net long silver at +25,261, up +1,636, with price down 2.78%. Elsewhere, the Dollar Index rose 0.89% with spec net +18,682 (-397) and commercial net -19,838 (+838), open interest 47,953 (0%) and a 16% COT Index. Sterling and the Swiss franc had 0% and 3% readings with specs net short -44,524 (+10,049) and -19,946 (+7,332), while the yen’s 37% came with specs at -63,298 (-10,405). Mexico remained net long at +82,382 (+2,930) with a 5% index; copper showed a 0% index with specs +85,266 (+5,518).
Major Currencies and the US Dollar Outlook
We should closely watch the US Dollar’s recent 0.89% gain, as speculative buying is starting to show signs of exhaustion. At the same time, major currencies like the Euro and Canadian Dollar have commercial positioning climbing to 78% and 72% respectively. This indicates that while the greenback has been strong, we may see a trend reversal or stabilization in these major currency pairs very soon.
Precious Metals, the Australian Dollar, and Natural Gas Trade Setups
For precious metals, we urge derivative traders to tread carefully as gold and silver have hit a 0% COT Index. Large speculators hold a massive net long position of over 243,000 contracts in gold, while commercial traders have aggressively hedged to the short side. This extreme divergence, paired with gold’s recent 3.38% weekly drop, historically points to a deeper downward correction in the coming weeks.
In contrast, we see an attractive contrarian setup in the Australian Dollar, which has reached a 97% COT Index. Large speculators are heavily net short by over 44,000 contracts, largely driven by sluggish economic data and weaker commodity demand. Because commercial buyers are heavily positioned at the top of their 26-week range, we expect a sharp short-squeeze rally if sentiment shifts.
We also recommend looking for buying opportunities in natural gas, where the COT Index has surged to 94%. Speculators are currently net short by nearly 198,000 contracts, even as the price recently ticked up by nearly 3%. With seasonal demand typically rising as we transition into the colder autumn months, this heavy short positioning could fuel a rapid upward price drive.
