Head of Commodity Strategy
In forex, speculative positioning remained heavily skewed toward US dollar selling despite a modest rebound in the greenback. As a result, the gross short across the eight IMM currency futures more than doubled to a six-month high of USD 17.4 billion. Net buying was seen in all but one of the eight currencies, led by a 24% increase in the euro net long to 163,361 contracts, equivalent to USD 4.6 billion. Additional net long increases of around USD 1.3 billion were recorded in JPY, CAD, and AUD. Euro and Canadian dollar longs are now the largest since August 2023, while the Australian dollar net long reached its highest level since December 2024. Some focus on the Japanese yen, after Japan's Prime Minister Sanae Takaichi's ruling party clinched a landmark post-war victory, securing a two-thirds super majority in the lower house. A super majority in the lower house will make it easier for her coalition to pass legislation and put the contentious issue of constitutional amendment back on the table. The yen initially strengthened against the dollar but lingering caution over possible intervention saw USDJPY move lower and away from a possible intervention zone near 160. As per the table, traders remain undecided on the nearterm direction with a small net short currently held.
The weekly COT update, covering managed-money positioning across 25 major commodity futures markets, captured a sharp shift in sentiment amid historic price reversals. In the reporting week to Tuesday 3 February, the Bloomberg Commodity Total Return Index fell 3%, with losses led by precious metals, soft commodities, and energy, only partly offset by pockets of strength in grains and livestock.
At the individual contract level, declines were led by silver (-21.4%), platinum (-12.9%), natural gas (-13.3%), and Arabica coffee (-13.2%), while gains were concentrated in crude oil, copper, and the three livestock contracts.
Faced with increasingly challenging trading conditions, managed-money accounts—having already been selling into the rally for several weeks amid rising volatility, higher exchange margins, and tightening VAR constraints—accelerated their deleveraging. Gold net longs were cut by 23% to 93,438 contracts, the lowest level since October; silver net longs fell 38% to a 23-month low of just 4,491 contracts; and platinum positioning was reduced by 42% to near-neutral at 1,083 contracts.
With the exception of gold, both long and short positions were reduced, highlighting an absence of appetite for fresh short selling into the slump and instead pointing to broad risk reduction.
HG copper’s surge to a record high, followed by a sharp 15.5% peak-to-trough correction, still left the contract up 3.8% on the week, albeit with heightened volatility prompting a reduction in both long and short positions.
Beyond metals, the week saw broad-based buying across crude oil and refined products, with the combined crude oil net long rising by 65.4k contracts to 341.3k—a six-month high and a marked rebound from near-flat positioning at the start of the year. Brent has settled into a wide USD 10 trading range, with recent, and so far unsuccessful, attempts to break above USD 70 largely driven by Iran-related supply disruption risks amid increased US military presence in the Middle East and renewed political rhetoric. The combination of elevated speculative length and a fading focus on Iran raises the risk of the narrative shifting back toward oversupply, potentially pulling prices back toward USD 60.
In agriculture, the grains sector recorded net buying across all three major crops, while soft commodities remained under pressure, led by heavy net selling in sugar and coffee. Livestock continues to stand out as the most favoured agricultural sector, with speculators holding a combined net long across the three contracts valued at approximately USD 19 billion.
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:
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.
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