Log in Open account
Australia

COT: Hedge funds buying expands from precious metals to copper and grains

Commodities
Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds and other speculators across commodities and forex during the week to last Tuesday, 12 March. A week that included the February US CPI, which topped forecasts, thereby reinforcing the Federal Reserve’s cautious approach to cutting interest rates. The commodities sector nevertheless saw broad gains led by industrial metals and beaten-down grains while the dollar traded softer.

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.

Forex: 

Broad dollar weakness during the reporting period did not translate into broad selling from speculators, with buying of GBP (+12k to 70.5k), EUR (+8k to 74.4k) and not least JPY (+16.5k to -102.3k) being partly offset by selling of NZD, AUD and CAD. Overall, the gross dollar long against eight IMM forex futures fell by 55% to near neutral at USD 1.26 billion. In focus this week will be Tuesday’s Bank of Japan decision on whether to pivot away from negative rates, but gains in the yen could remain limited by dovish commentary and risks of a hawkish surprise by the Fed on Wednesday when the FOMC meets.

For the past three years, speculators have traded the yen with a short bias, culminating last month when the net short reached 133,000 contract (USD 11.3 billion) before two weeks of short covering lowered the net short to the current 102.3k contracts.

Commodities

The Bloomberg Commodity index, which tracks a basket of 24 major futures markets split between energy (30.1%), metals (34.2%) and agriculture (35.7%), traded higher for a second week, and while it was precious metals at the start of the month that led the gains, last week saw broad gains emerging across all sectors. Out of the 26 futures contracts tracked in this, only crude oil and natural gas saw notable declines while all other sectors traded higher, including the beaten-down grain sector with hedge funds reducing a record short position ahead of the Northern Hemisphere planting season.

On an individual level, the biggest changes based on nominal values was the USD 6.2 billion increase in gold lifting the net to USD 34.6 billion, and now exceeding the combined net long in WTI and Brent crude oil at USD 32.4 billion. Other notable buying activity was seen in silver, platinum, copper, soybeans and corn.

Energy: Ahead of last week’s upside break, the crude net long was reduced for a second week, with the bulk of the 16.7k contract reduction being profit-taking. Higher fuel prices due to Ukraine attacks on Russian plants had a limited positive impact on positioning.
Metals: Gold’s surge to a fresh record was supported by another strong week of hedge funds buying. In just two weeks funds bought 91.5 contracts or 285 tons, lifting the net long to a two-year high at 159.6k. Silver reached an 8-month high at 26.7k while copper flipped back to an 8.5k long, with traders spending the rest of the week chasing the price higher to rebuild bullish bets.
Grains: first week of meaningful buying (+77k contracts) since last July, led by soybeans (+16.8k to -155.1k) and corn (+40.9k to -256k.
Softs: funds turned cocoa buyers for the first time in seven weeks, thereby adding further fuel to an ongoing parabolic rise. Cotton saw the first small reversal following an eight-week buying spree.

15 Mch 2024: Commodity weekly: Green shoots seen across key sectors
13 Mch 2024: Lack of catalyst pushes crude into tightening range
8 Mch 2024: Commodity weekly: Gold and silver steal the limelight
8 Mch 2024: Investing with options - Gold optionality
6 Mch 2024: How to add gold exposure to your portfolio
6 Mch 2024: Video: What happened to the gold prices?
1 Mch 2024: Grains dip, cocoa soars, gold and oil see rays of strength: February’s commodity mix
29 Feb 2024: Podcast: Why speculative interest is important to understand
28 Feb 2024: Oil price stuck in neutral despite underlying strength
27 Feb 2024: Resilient gold market defies lower rate cut predictions
22 Feb 2024: Copper short squeeze fades ahead of key resistance
21 Feb 2024: Gold's resilience despite recent futures and ETF selling
20 Feb 2024: WTI crude eyes resistance amid improved signals
16 Feb 2024: Commodity weekly: Grains tumble; Industrial metals eye China boost
15 Feb 2024: US rate cut delay drives gold below $2000
13 Feb 2024: Video: What is driving Cocoa's sweet price
9 Feb 2024: Commodity weekly: Refined product strength lifts crude
9 Feb 2024: Podcast: Year of the metals
7 Feb 2024: Crude oil supported by tightening fuel outlook
6 Feb 2024: Gold and silver turn defensive on reduced Fed rate-cut optimism
2 Feb 2024: Commodity weekly: Tight supply adds fuel to uranium and cocoa rally
1 Feb 2024: Commodities: January performance and ETF flows

Previous "Commitment of Traders" articles

11 Mch 2024: COT: Specs rush back into gold, elevated yen short in focus
4 Mch 2024: COT: Underinvested speculators fuel gold's latest surge
26 Feb 2024: COT: Record corn short, cocoa surge no longer supported by speculators
19 Feb 2024: COT: US inflation surprise drives broad selling of metals
5 Feb 2024:COT: Speculators chase false crude break; grain short extends further


Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
    Read full article
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

    Read full article
  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
    Read full article
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
    Read full article
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
    Read full article
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
    Read full article
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
    Read full article
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
    Read full article
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
    Read full article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia
Products & pricing
Asset Management
    Platforms
    Accounts & service
    General
    Other
    Legal

    Trading can result in losses. Please ensure you understand the risks.

    The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

    Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

    Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

    The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

    Please click here to view our full disclaimer.