Head of Commodity Strategy
Summary: The Commitments of Traders report covering positions held and changes made by money managers in the week to June 9. Crude oil continued to be bought albeit at a much reduced pace while fuel products were sold on rising overhang of stocks. Gold and silver longs dropped further as the sector struggle to find a defense against strong appetite for risk elsewhere
Saxo Bank publishes two 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.
The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, June 9. Appetite for risk remained high that week, not least following the better-than-expected US job report on June 5. The S&P 500 rallied 4.2%, the dollar index lost 1.4% while bond yields jumped. The Bloomberg Commodity Index climbed 1.5% with gains seen across all sectors with the exception of precious metals.
A mixed week in commodities which despite broad price gains did not yield much in terms of major position changes. Crude oil continued to be bought albeit at a much reduced pace, fuel products were sold on rising overhang of stocks while natural gas held steady. Precious metals remained out of favor with the gold and silver longs dropping further while enthusiasm for copper attracted strong buying. Grains, led by corn, continued to be sold while the sugar position flipped back to long. Thereby becoming vulnerable to profit taking after the rally’s main engine, crude oil, began looking exhausted.
Energy: Buying of crude oil slowed despite another week of strong gains for both WTI and Brent crude oil. WTI saw the smallest amount of buying in this cycle with bullish bets close to a two-year high. Elevated levels of fuel products in the U.S. drove a reduction in the gasoline (RBOB) net-long to a three-year low and a rise in the distillate (ULSD) short to a three-month high.
Metals: Gold selling extended into a third week with the net long falling by 9k lots to 127k lots, a one-year low and down 55% since the February peak. Copper meanwhile and as expected attracted additional buying following the technical break above $2.50/lb, a key level of support-turned-resistance since 2017. The near five-fold jump took the net-long to 14k lots, a 15-month high.
Agriculture: Ahead of Thursday’s global supply and demand outlook report from the US Department of Agriculture, the corn short had extended to 297k lots, a 13-month high and biggest seasonal short in at least 20 years. This despite a continued steady recovery in the price. The wheat short jumped by 88% ahead of the WASDE report which pinned global stocks next year at a record high. The soybeans long meanwhile more than doubled on increased Chinese buying.
The soft sector was mixed with the oil-related rally in sugar helped flip the position back to a net long while the Arabica coffee short more than doubled in response the deteriorating technical outlook.
AI: The good, the bad, and the bubble
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Peter Garnry,
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As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
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Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
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The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
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Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
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While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
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As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
