Head of Commodity Strategy
Summary: This summary highlights positions and changes made by speculators such as hedge funds and CTA's across commodities and forex futures and options up until last Tuesday, November 24. A week where the market behavior was dictated by continued vaccine optimism and the formal start of President-elect Biden's transition, news that removed the threat of a contested transfer of power.
Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
The below summary highlights futures positions and changes made by hedge funds across commodities and forex up until last Tuesday, November 24. The reports, normally published on Friday’s by the U.S. CFTC was delayed due to last week’s Thanksgiving holiday.
During the week, the market behavior was dictated by continued vaccine optimism and the formal start of President-elect Biden’s transition, news that removed the threat of a contested transfer of power. These market-friendly developments helped lift the S&P 500 by 0.7% while the Dow Jones topped 30,000 for the first time. The dollar traded softer, ten-year U.S. bond yields ticked higher by a couple of basis points while the Bloomberg Commodity index rose by 1.1%, led by strong gains in crude oil, copper and agriculture while gold and silver both took a hit.
Commodities
Speculators increased bullish bets across 24 major commodity futures to a near three-year high in the week to November 24. The 3% increase to 2.3 million lots was primarily driven by those commodities, most noticeable crude oil, benefitting from a vaccine driving recovery in growth and demand. Gold, the safe haven metal, saw another slump while copper and platinum saw increased buying interest. The agriculture sector was mixed with another week of profit taking in soybeans and sugar being more than offset by strong buying of corn, coffee and not least cocoa.
Forex
The raised level of market risk appetite driven by vaccine optimism and reduced risk of a contested U.S. presidential election helped softening the dollar during the week to November 24. The weakness, most prominent against CAD, AUD, NZD and MXN, helped drive a 12% increase in the overall dollar short against ten IMM currency futures and the Dollar Index to $25.3 billion. Still well below the -$34.9 billion peak back in August.
The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.
Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)
The reasons why we focus primarily on the behavior of the highlighted groups are:
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.
