COT: Gold bulls stand firm despite recent correction COT: Gold bulls stand firm despite recent correction COT: Gold bulls stand firm despite recent correction

COT: Gold bulls stand firm despite recent correction

Ole Hansen

Head of Commodity Strategy

Key points:

  • Commitment of Traders report highlighting futures positions and changes made by speculators across forex and commodities during the week to 23 April
  • The USD long extends to a fresh five-year high, despite some emerging price weakness
  • Gold bulls bought into last week's weakness, protecting an elevated long established at much lower levels
  • A heavily shorted grains sector sees the strongest week of net buying since last July

COT on forex

In the forex market, aggressive dollar buying extended to a sixth week, despite some emerging weakness, especially against the euro and the activity currencies of CAD, AUD and NZD. Overall, the gross dollar long against eight IMM futures and the dollar index jumped by 28% to USD 32.9 billion, a near five-year high. The move was led by the euro where traders flipped their position to a -10k net short for the first time since September 2022, the yen net short reached an 18-year high at -180k while the 26k net short in Sterling was the biggest since September 2022.

Non-commercial IMM futures positions versus the dollar in week to April 23

COT on Commodities

In the week to 23 April, the Bloomberg Commodity Total Return index traded near flat for a second week with strong gains in industrial metals, livestock, and not least grains offsetting losses in energy, precious metals and softs. On an individual level the gainers among the 26 futures market tracked in this were natural gas, copper, wheat, cocoa and hogs while sellers focused on fuel products, gold, silver, platinum and coffee.

Two major developments stood out in this report, namely strong buying of a heavily shorted grains sector, led by surging wheat on spring weather worries in southern Russia, parts of the US plains and Western Europe, and not least the surprisingly small reaction to the near 3% gold correction.

Two failed attempts to gain a foothold above USD 2400 in the prior week helped drive an overdue gold correction, but as the data shows, the near 3% correction in fact triggered a small amount of net buying, not selling, and it highlights the strength of the rally with the bulk of the length (91.5k contracts or 285 tons) having been bought in early March below USD 2200. In other words, a much deeper correction potentially below USD 2250 is needed to trigger accelerated long liquidation. 

Managed money long, short and net positions in the week to April 23. Selling of crude oil, gas oil, platinum, sugar and cotton being offset by demand for natgas, copper, and all grains
Energy: Weaker crude oil prices, as the geopolitical risk premium deflated, helped drive a 63k contract reduction in the crude net long to a six-week low. Weak diesel demand helped drive a 40% reduction in the gas oil long.
Metals: Gold bulls added a length as prices fell, platinum flipped back to a 4.8k net short, while the copper net long surged to a 38-month high at 67k.
Grains: The combined net short in soybeans, corn and not least wheat was by 15% to a near 3-month low, highlighting the risky nature of holding a near record short into a potential challenging planting and growing season.
In softs, the sugar net long was cut to near neutral as prices slumped to a 15-month low. Surging cocoa seeing continued net selling from funds, with the net long being reduced to a 14-month low as traders continued to exit an increasingly disorderly market.

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 articles:

26 April 2024: Commodity weekly: Sticky inflation and adverse weather focus
23 April 2024:
 What drives the gold and silver correction ?
19 April 2024: 
Commodity weekly focus on copper, gold, crude and diesel
17 April 2024: 
Copper rally extends to near two year high
16 April 2024: 
Crude oil's risk premium ebbs and flows
12 April 2024: 
Gold and silver surge at odds with other market developments
10 April 2024: 
Record breaking gold highlights silver and platinum's potential
5 April 2024: 
Commodity market sees broad gains, enjoying best week in nine months 
4 April 2024: 
What's next as gold reaches USD 2,300
3 April 2024: 
Q2 Outlook: Is the correction over?
3 April 2024: 
Cocoa: A 50% farmgate price boost a step in the right direction
27 Mar 2024: 
Crude oil maintains support amidst array of bullish signals
26 Mch 2024: Gold's behaviour points to sustained demand
20 Mch 2024: 
Attacks on Russian refineries lift risk premium and crude prices
19 Mch 2024: 
How to add copper exposure to your portfolio
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

Previous "Commitment of Traders" articles

22 April 2024: COT: Declining momentum may signal shift toward consolidation
15 April 2024: 
COT: Hedge funds propel multiple commodities positions beyond one-year highs
8 April 2024: 
COT: Speculative interest in metals and energy gain momentum
2 Apr 2024: 
COT: Gold and crude longs maintained amid strong underlying support
25 Mch 2024: 
COT: Hedge funds zoom in on crude, copper and silver
18 Mch 2024: 
COT: Hedge funds buying expands from precious metals to copper and grains
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


Quarterly Outlook 2024 Q2

2024: The wasted year

01 / 05

  • Macro: It’s all about elections and keeping status quo

    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article
  • FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article
  • Equities: The AI and obesity rally is defying gravity

    Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.

    Read article
  • Fixed income: Keep calm, seize the moment

    With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

    Read article
  • Commodities: Is the correction over?

    Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

    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.