COT: Gold and coffee shorts getting squeezed
Head of Commodity Strategy
Summary: Leveraged funds were net-buyers of commodities for a third consecutive week with broad-based buying of agriculture and natural gas offsetting selling elsewhere, most noticeably in crude oil and gold.
Saxo Bank publishes two 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.
To download your copy of the Commitment of Traders: Commodities report for the week ending October 9, click here.
Hedge funds remained unconvinced about the bullish oil narrative which in recent weeks drove the price to a four-year high. In the week to October 9 they sold both Brent and WTI for a second week as supply worries eased and demand concerns began receiving some attention. The WTI net-long reached a one-year low and it has now been sold in 11 out of the past 13 weeks.
HG copper was sold with the net-short rising to a three-week high. However, the outlook for tight supply, falling LME stocks and strong China import data are unlikely to support the latest short accumulation.
In grains, short-covering continued to be led by corn and the soybean complex. During the week soybeans received some support with rain across the US Midwest and Plains delaying the harvest while potentially negatively impacting the crop condition. Overall the combined net-short in the three major crops was reduced by 22k lots to 92k lots, not far from the five-year average for this time of year.
A stronger Brazilian real, tighter sugar supply on EU export concerns and a technical breakout in coffee helped trigger a 57% and 16% reduction in the net-shorts. The latter has been a classical example of why it is important to follow the COT updates. A record short due to weak fundamentals had driven coffee to a 12-year low but in just three weeks it has retraced almost half of the previous 12-month decline.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.