Swap Dealers Vs. Gold Price

As one can see in the chart below, swap dealers (red line) – similarly to producers and contrary to money managers and other reportables – are generally net short and move in the opposite direction to the gold prices – they actively buy (reducing their short positions) when the market goes down and actively sell when the market goes up (increasing their short positions). For example, swap dealers were systematically adding short contracts from mid-2008 until mid-2011, when the bull market ended. This is why investors look at swap dealers and use changes in their positions as a sentiment indicator for the gold market – swap dealers tend to be most bearish just prior to significant price tops and most bullish just prior to significant price bottoms.

You can find the swap dealer information in the COT report.