Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
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Global Head of Investment Strategy
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COT: Major switching from oil to gold and grains last week
Ole Hansen
Head of Commodity Strategy
Summary: Hedge funds maintained an almost unchanged exposure to 24 major commodity futures and options in the week to June 11. However, some major switches continued between the sectors.
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: Commodity report for the week ending June 11, click here
Macroeconomic uncertainties weighed on growth dependent commodities from energy to industrial metals while at the same time supporting another strong week of gold buying. No letup in the deteriorating outlook for US crop production resulted in another across-the-board buying of CBOT grains and oilseeds futures.
To download your copy of the Commitment of Traders: Commodity report for the week ending June 11, click here
Seven consecutive weeks of selling has now reduced the combined long in Brent and WTI crude oil by 41% to 421k lots, a near four-month low. This before the tanker attacks in the Gulf of Oman briefly boosted prices before being capped again on demand fears and another counter seasonal rise in US crude oil stocks. Monthly oil market reports from the Energy Information Administration, Opec and the International Energy Agency all showed another downgrade to world oil demand while non-Opec supply growth was kept stable.
From a technical perspective the dwindling long and increased short positions have left the market exposed to an upside move should the situation in the Middle East deteriorate further. On the other hand the failure to break higher last week amid the evidence of Iranian involvement could indicate that further losses can be seen should the situation stabilise. In Brent the levels in our opinion to look out are currently $59.50/b to the downside and $64.50/b to the upside.
From a technical perspective the dwindling long and increased short positions have left the market exposed to an upside move should the situation in the Middle East deteriorate further. On the other hand the failure to break higher last week amid the evidence of Iranian involvement could indicate that further losses can be seen should the situation stabilise. In Brent the levels in our opinion to look out are currently $59.50/b to the downside and $64.50/b to the upside.
Gold needs to break above its wall of resistance soon in order to avoid a pullback from recently established longs getting nervous. This after having seen funds buy a record 124k lots during a two-week period to June 11 with most of that probably bought above $1,320/oz. However, the 33% (39k lots) increase in the net-long last week was primarily driven by a 26k lots of short-covering while fresh buying only accounted for 13k lots. It highlights the hesitancy of getting too aggressively long ahead of key resistance with some momentum buyers keeping their powder dry until after the potential break (above $1,380/oz) has occurred.
On that basis we are now witnessing a battle between strategic buyers versus tactical short sellers. A draw between the two is likely to be seen as long gold stays within a $1,320/oz to $1,358/oz range.
Growth concerns, not least in the US and China, drove another increase in the HG copper net-short to a fresh record of 52k lots. Short-sellers are looking for weakness to extend further on a break below $2.6/lb while some short-covering may emerge above $2.7/lb.
Buying of the three major crops extended into a fourth week albeit at a slower pace than previously. The corn net-long reached 111k lots, a six-month high, following an historical turnaround in production prospects during the past month. Funds which held a record short back in April have been forced to respond to the +25% price increase and are now accumulating longs in the belief that the outlook will continued to deteriorate.
Forecasts for even more rain have sent corn futures higher for a sixth consecutive day as hopes for more planting vanish and concerns grow about the prospects for the crop that did manage to get planted. The last time the new crop contract for December delivery spiked higher around this time of year was in 2016 when it peaked at $4.49/bu before falling by more than 20% as conditions improved. So far the current December contract (ZCZ9) has reached $4.72/bu with the fundamental and a not yet elevated speculative long providing continued support.
Forecasts for even more rain have sent corn futures higher for a sixth consecutive day as hopes for more planting vanish and concerns grow about the prospects for the crop that did manage to get planted. The last time the new crop contract for December delivery spiked higher around this time of year was in 2016 when it peaked at $4.49/bu before falling by more than 20% as conditions improved. So far the current December contract (ZCZ9) has reached $4.72/bu with the fundamental and a not yet elevated speculative long providing continued support.
Soft commodities were bought for a third consecutive week as short-covering provided sugar and coffee with a boost while speculators continued to add to cocoa longs.
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