COT: Metal indigestion after week of strong speculative buying

Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, November 15. A week that saw markets respond, prematurely as it turned out, to market friendly FOMC and China Covid news. Developments that saw specs cut their dollar long to a 17-month low while rushing into precious and industrial metals. Elswhere crude oil and corn was sold while sugar buying hit a sweet spot.

Saxo Bank publishes 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.
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 reasons why we focus primarily on the behavior of the highlighted groups 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


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This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, November 15. A week that saw stock markets surge higher while the dollar and bond yields dropped on - as it turned out -premature speculation the FOMC was approaching peak hawkishness. China focused commodities, such as industrial metals received a boost on signs, again prematurely, that the government was easing its zero covid tolerance approach. 


All developments that helped cut the speculative dollar long to a 17-month low while triggering a major round of speculative buying across precious and industrial metals, the latter partly explaining the correction currently seen across metals with the selling of recently established longs weighing on markets.


The Bloomberg Commodity traded up 1% during a very mixed week for the sector which saw selling of energy and livestock being more than offset by gains in precious and industrial metals, as well as softs. Responding to these developments speculators turned major buyers of metals and softs, led by gold, copper and sugar while energy and grains were sold led by crude oil, corn and soybeans. 


Speculators turned net sellers of crude oil following a failed early November attempt to break higher. With China optimism turning to pessimism and an important part of the US yield curve signaling an increased risk of a recession, speculators had already begun reducing their crude oil exposure before selling accelerated ahead of the weekend. In the week to November 15, they cut bullish bets on WTI and Brent by a total of 52k contracts or 5.2 million barrels to 400k contracts,on a combination of long liquidation (-39k) and fresh short selling (+13k). All three fuel products also saw bullish bets being reduced as the short-term demand outlook showed signs of softening.


Aggressive buying of gold on dollar and yield weakness in the week to November 15 and the subsequent failure to break above key resistance in the $1800 area has left the metal exposed to a setback with the yellow metal now focusing on $1735 support ahead of $1720. During a two-week period to last Tuesday, speculators bought 80,000 contracts or 8 million ounces to record the strongest two-week buying pace since June 2019. The result being the net position flipping from a short to 41k contract net long, a three-month high. Copper buying lifted the net by 57% to 25k contracts, a seven-month high, with silver and platinum also seeing strong net buying.


The total net long across the six major grains contract dropped to a three-month low at 430k contracts with the main driver being corn, which despite trading unchanged on the week saw speculators dump 61k contracts, the biggest one-week clear-out of longs since August 2019. The wheat net short extended to a 27-month high at 47k contracts with soybeans and soymeal also suffering setbacks. Going against the trend we saw another small increase in the soybean oil long to 110k contracts, a 21-month high.

In softs, the 7% rally in sugar help drive a record 89k contract jump in the net long to 166k contracts. The Arabica coffee net short jumped by 1/3 and after four weeks of selling it reached a 28-month high at 19k contracts. Cocoa meanwhile flipped back to a net long while the cotton long received a 24% boost. 


In forex, flows turned decisively against the dollar, a day before Fed Chair Powell delivered his hawkish comments which only managed to trigger some temporary dollar strength. Before this reporting week, the Greenback had increasingly been losing steam against several of the nine IMM forex futures tracked in this report. The bulk of the net dollar selling had up until recently been mostly against the euro which since late August has seen €19 billion of net buying, reversing the net position from a 48k lots short to a 106k long. This past week buying accelerated with the net long jumping 41% to a 17 month high. Combined with an aggressive 24% reduction in the JPY net short and a 250% jump in the MXN net long, the combined dollar long ended up being reduced by 59% to just $5 billion, the weakest belief in a stronger dollar since August last year.

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