The so-called COT, which stands for CommitmentOf Traders, is the abbreviation of Trader’s Letter of Authorization. It is the trading data in the New York Mercantile Exchange (COMEX) futures market released by the U.S. Commodity Futures Trading Commission after the market closes every Friday until Tuesday of that day, that is, the number of positions and changes in positions during the current week and the previous week.

COT includes three parts of trader data:

1. Large institutional traders such as hedge funds who engage in speculative transactions are called non-commercial traders. The main purpose of their trading is to make a profit from the transaction, so whether the price of gold rises or falls, they may make a profit from the transaction. Usually they do not buy or sell physical goods, only on paper.

2. Gold mines, jewelry manufacturers and other institutions engaged in the gold business are called commercial traders. The main purpose of their trading is to lock in the price and avoid losses if the price fluctuates significantly. For this reason, they often sell gold in advance when they expect the price of gold to fall; or buy gold in advance when they expect the price of gold to rise to avoid losses. They may require physical delivery, which is to use physical gold instead of paper transactions.

3. Retail investors, often called unreportable small speculators, are ordinary investors with poor strength. Mainly following the trend.

COT data is divided into 3 categories: long positions, short positions and arbitrage positions, which are commonly known as hedging positions. Holding long and short positions at the same time earns the price difference.

It is generally believed that the position direction of large speculators will determine the trend of gold prices. Therefore, what people are most concerned about is the changes in the positions of large speculators, especially the increase or decrease in net long positions. If the net long position (that is, the net long position minus the short position) rises, it is a sign that big speculators are trying to push gold prices higher. However, if the net long position is too high, such as reaching a historical high, it may cause the price of gold to fall in the short term. Because although they buy long futures positions, they do not intend to obtain and hold physical gold, so the contract must be liquidated before expiration, that is, a short contract is signed to ensure market balance. Therefore, when selling, it will cause the gold price to move in the opposite direction.