COT: Specs rush back into metals; weak crude conviction

This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, August 29. A week that included the markets' initial, and very positive risk-on response to data pointing to a softening US job market as well as declining consumer confidence. The ‘bad news is good’ reaction was driven by market speculation the Federal Reserve was getting closer to cease its aggressive tightening campaign. Global and US stock indexes climbed by more than 2%, US bond yields slumped, especially at the front end of the curve, while the dollar traded a tad softer. Commodities rose strongly with gains seen across all sectors led by precious metals. 

Commodity sector:

The Bloomberg Commodity index rose nearly 2% on the week as the market responded to China’s efforts to support its property sector, stock market and currency, and not least the prospect of a US peak rate being brought forward. Both developments supporting the metal sector, both industrial and precious. The energy sector continued its week-long advance with prolonged production cuts from Saudi Arabia and its allies continuing to tighten a market that has yet to witness a slowdown in demand. Finally, the agriculture sector, except for wheat, all traded higher led by soybeans, and not least the softs sector where sugar added 8.8% and cocoa 4.8%.

Hedge funds and CTAs responded to these developments by increasing their overall net long across 24 major commodity futures by 18% to 1.08 million contracts, with demand being led by WTI crude oil, gold, silver, platinum and soybeans, while selling was concentrated in a few contracts, led by Brent, natural gas and wheat.