COT: Funds boost metals investment as dollar long positions halve amid weakness COT: Funds boost metals investment as dollar long positions halve amid weakness COT: Funds boost metals investment as dollar long positions halve amid weakness

COT: Funds boost metals investment as dollar long positions halve amid weakness

Ole Hansen

Head of Commodity Strategy

Key points:

  • Positions and changes made by speculators in commodities and forex in the week to August 20
  • Dollar long cut in half as rate cut focus drove broad weakness
  • Gold, silver and copper see demand as the dollar and Treasury yields drop
  • Crude oil selling resumes with the gas oil (diesel) short jumping to a 15-month high

Forex:

In the week to 20 August, the dollar fell around 1%, with broad losses driving a 56% reduction in the dollar gross long vs 8 IMM futures to USD 4.9 billion, a five-month low. The reduction was primarily driven by a doubling of the euro long to 56k contracts (USD 4 billion equivalent), continued GBP buying, and not least CAD, where speculators recently held a record short position amid the outlook for a faster rate cut trajectory in Canada compared with the US. A negative view that was challenged in the past couple of weeks—forcing short positions to be closed—as the chance of a September US rate cut rose. Elsewhere, the first JPY net long since March 2021 held steady last week.

Non-commercial IMM futures positions versus the dollar in week to August 20

Commodities:

The reporting week saw global financial markets continue a strong rebound, with early August's market turmoil now a distant memory. Instead, increased expectations for a September US rate cut helped drive stock markets sharply higher and the dollar and long-end US Treasury yields lower. Elsewhere, China, the world's top consumer of commodities, showed small signs of improvement, and the combination of lower funding costs and demand recovering saw industrial metals put in a strong performance, with the BCOM Industrial Metal Total Return Index rising 4.5% on the week. Precious metals enjoyed the incoming tailwind from lower funding costs, while the energy sector remained troubled by signs of weakening demand, not least for diesel.

Overall, these mixed signals for commodities saw buying of industrial and precious metals offset by selling of energy, softs, and to a lesser extent grains. On an individual level, hedge funds increased their gold long to a four-year high, the copper net long jumped 84% from near neutral, while the wheat net short was reduced by 28%, and the natural gas long jumped 43%. Selling was concentrated in crude oil and gas oil (diesel), as well as soybeans, corn, and sugar.

Managed money long, short and net commodities positions in the week to August 20
Energy: Crude oil selling resumed, and led by WTI, it reduced the combined net long to 240k, while the gas oil short jumped to a 15-month high at 27k contracts. Buyers returned to natural gas, but overall, the net long at 55k remains relatively small.
Metals: Gold’s almost uninterrupted rally to a fresh record high saw the net long increase by 8% to a fresh four-year high at 237k contracts, the silver long jumped by one-third to 32k, while buyers returned to HG copper (+84% to 6.4k) after the price started to recover.
Grains: The sector saw mixed action, overall leaving a still very elevated net short in soybeans, corn and wheat near unchanged at 494k contracts, with selling of soybeans and corn being offset by short-covering in wheat.
The softs sector saw a 200% increase in the sugar short and a cotton short rising back to near a record high disguise demand for cocoa and coffee, both of which only saw small increases in their net longs despite much higher prices amid continued adverse weather support.

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.


Recent commodity articles:

23 Aug 2024: Commodities Weekly: Metal strength counterbalancing energy and grains
22 Aug 2024: Persistent supply contraints keep cocoa prices elevated
21 Aug 2024: 
Weak demand focus steers crude towards key support
19 Aug 2024: 
Resilient gold bulls drive price to fresh record above USD 2500
19 Aug 2024: 
COT Buyers return to crude as gold stays strong; Historic yen buying
16 Aug 2024: 
Commodities weekly: Gold strong as China weakness drags on other markets
9 Aug 2024: 
Commodities weekly: Calm returns to markets, including raw materials
8 Aug 2024: 
Sentiment-driven crude sell-off eases, allowing traders to focus on supply risks
7 Aug 2024: 
Limited short-selling interest observed during copper's recent aggressive correction
6 Aug 2024: 
Video: What factors are fueling the current market turmoil and gold's response
5 Aug 2024: 
COT: Broad commodities sell-off gains momentum; Forex traders seek JPY and CHF
5 Aug 2024: 
Commodities: Position reduction in focus as volatility spikes
2 Aug 2024: 
Widespread commodities decline in July, with gold as the notable exception
31 July 2024: 
Crude's month-long slide halted by fresh Mideast worries
30 July 2024: 
Record demand explains gold's current resilience
29 July 2024: 
COT: Energy and metals selling cuts hedge fund long to four-month low
4 July 2024: 
Sluggish US economic indicators boost demand for gold and silver
4 July 2024: 
Podcast Special: Quarterly Outlook - Sandcastle Economics
2 July 2024: 
Quarterly Outlook - Energy and grains in focus as metals pause
1 July 2024: 
COT: Crude long builds ahead of Q3 while grains selling accelerate

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

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

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read 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

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.