Agriculture: The grains sector saw continued selling, albeit at a slower pace than recent weeks. The soybeans complex was hardest hit once again with the soybean net long falling to a 13-month low at 49.7k, a far cry from the 238k lots reached last October. Small amounts of buying was seen in corn and wheat, with the overall combined net long in the three major crops falling to a one-year low at 259k lots, and down 55% from the May peak.
The softs sector was mixed with sugar and cocoa selling being joined by cotton, where the net long after 16 weeks of buying was cut by 12% to 81.2k lots. Coffee bucked the trend as net buying increased the long by 5% to 38.4k lots.
Metals: Speculators are increasingly not positioned for a potential bounce in precious metals after making deep cuts last week, most notable in silver where the net long collapsed by 94% to just 900 lots, a 27-month low, while the gold long was reduced by 30% to 61.6k lots. The heavy rounds of long liquidation driven by a stronger dollar, China Evergrande worries as well as pre-FOMC jitters. HG Copper was also sold with the net long seeing a 37% reduction to just 22.8k lots, a four-week low. Platinum, one of the most shorted commodities currently, received a small boost driven by a combination of short covering and fresh longs being added.
Latest: Gold trades unchanged after finding support in the $1745 area last week. With real yields and especially the dollar not providing any support currently, the small bounce seems to be driven by continued Evergrande angst and the global energy crunch which is spreading from gas and coal to crude oil, and which in our opinion could reignite the reflation trade, thereby supporting gold at a time where bonds' safe-haven status is challenged given the prospect for early tapering. Focus this week on EU CPI and US PCE data as well as US stimulus package and debt ceiling.