Collapsing COMEX Open Interest: Gold And Silver Price Analysis

Betraying the notion that it is overrun by "speculators" and exacerbating the daily volatility, total contract open interest in COMEX gold and silver has collapsed to levels not seen in over a decade. What, if anything, does this signal for price in the short term? 

Of course, for now, the only thing that matters to price is the trend in the geopolitical headlines. As long as war and strife continue to dominate the narrative, precious metal prices look to remain pressured. The narrative is that higher energy costs will lead to inflation, higher interest rates, and a rising U.S. dollar. Those factors combine into a stew that has led to selling in gold and silver nearly every single day since the war began three weeks ago. Here's a quick summary from our friend Ronnie Stoeferle at the In Gold We Trust report: 

Gold Price Analysis And Technical Indicators

Prices have plummeted, with gold tapping its 200-day moving average for the first time since February 16, 2024. 

Gold - Weekly Nearest Candlestick Chart

All this selling has wiped out investor sentiment and positioning. The chart below shows the bullish percent index for the mining shares. Note the drop to levels not seen in nearly four years. 

But what's most astonishing is the utter collapse in contract open interest on COMEX. As recently as January 22, total open interest for COMEX gold stood at 555,309 contracts. By last Friday, March 20, open interest had fallen by over 28% to 399,397. That's the lowest reported daily total since December 14, 2018!  

The collapse in COMEX silver open interest is even more astonishing. After reaching a recent peak of 161,943 contracts on January 26, total open interest fell to 111,607 last Friday. That's a drop of 31% and the lowest daily total since May 2, 2012...nearly 14 years ago! 

Gold Price Forecast And Investment Outlook

So let's see... 

Price, sentiment, and open interest have all collapsed since the onset of the Iran War three weeks ago. Instead of rate cuts and easy monetary policy, the "market" now expects rate hikes and tightness. Is this a sign of more weakness to come or could prices be near a bottom? 

I'm siding with the latter. Even if the news from the Middle East continues to worsen, I expect a realization that instead of hiking rates to control inflation, the Fed is more likely to cut rates to promote liquidity. This will lift sentiment off the mat and drive speculator buying back into the COMEX precious metals. Contract open interest will rise, and with it, prices.  

It may take some time to get there, but I still expect $6000 gold sometime in 2026 and even higher prices in 2027 and beyond.