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COT: Specs rush back into gold; muted oil market reaction to MidEast crisis

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Ole Hansen

Head of Commodity Strategy

Summary:  This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, October 17. A week that saw US Treasury yields continue to spike higher while the market had to deal with geopolitical uncertainties as the Israel-Hamas war intensified. Commodities saw wrong-footed short sellers of gold turn into heavy buyers while the Middle East crisis triggered a subdued response in crude oil.

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.

What is the Commitments of Traders report?

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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming

Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.

Commodity weekly: Gold’s surge is more than safe-haven demand driven
Global Market Quick Take: Europe – October 23 2023



This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, October 17. A week that saw US Treasury yields continue to spike higher while the market had to deal with geopolitical uncertainties as the Israel-Hamas war intensified. The dollar traded higher while the short-end rates market priced in a high for longer outlook, the result being a jump in US 2-year yields to levels last seen in 2006. Commodities saw wrong-footed short sellers of gold turn into heavy buyers while the Middle East crisis triggered a subdued response in crude oil.

Commodity sector:

The Bloomberg Commodity index jumped 1.2% during the week with gains seen across all sectors except industrial metals and livestock. Speculators responded surprisingly in some markets, to rising Treasury yields, a stronger dollar and geopolitical uncertainty: Brent bought but WTI sold despite Middle East supportive focus, Gold sees big round of buying with net back to a long, copper sold ahead of key support, grains selling looks exhausted, coffee shorts and cotton longs both getting squeezed. While 14 out of 24 major futures contracts covered in this update saw net selling, the overall exposure rose, primarily driven by demand for Brent, gold, silver and coffee.


Crude oil and fuel products: showed a mixed response to the MidEast crisis with WTI length cut by 48k to 221k while Brent saw a 74.3k increase to 227k. Overall, the comb. long rose just 6% to 448k, some 20% below the Sept peak at 560k. Longs in GasOil and RBOB reduced on increased short selling while length was added to ULSD
Gold, silver and copper: Wrongfooted speculators bought 56.7k contracts (fourth biggest in last decade), to reverse an ill-timed short back to a 41.9k net long. Silver's 5% rally drove a reversal back to a 9k net long while the platinum short only saw a small 6% reduction to -11.6k. Copper challenging key support in the $3.54/55 area triggered a 16.4k increase in the net short to 21.6k
In grains, speculators held a net short in soybeans (-2k) for the first time since April 2020. Corn short covering extended to a second week (+4k to -109k) with selling of wheat grinding to a halt (unch at -104k)
Softs & Livestock: a strong week across softs saw length being added to sugar and cocoa, while a 6.5% coffee rally forced short covering (+11.3k to -18k). Cotton length meanwhile continued to be reduced (-14.4k to 33.3k).
In forex, the gross dollar long saw a small 3% increase to $10.8 billion with buying of euros ($0.9bn equivalent) being offset by broad selling of the other seven IMM forex futures.
In fixed income, leveraged funds stepped up selling interest at the front of the curve with the net shorts in 2’s and 5’s hitting fresh records at 1.56 and 1.86 mln contracts. Overall the DV01 value of the entire short position across the yield curve reached $408 mln per basis point change, a $12.9 mln increase on the week. The bulk of the opposing long is held by the asset manager category.

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