COT:  Speculators bought energy and grains, sold gold ahead of US elections

COT: Speculators bought energy and grains, sold gold ahead of US elections

Ole Hansen

Head of Commodity Strategy

Key points:

  • Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week leading up to last Tuesday, 5 November—the day of the US elections.
  • Speculators bought euros, sold yen and sterling, overall leaving an elevated dollar long nearly unchanged.
  • Temporary buying of crude oil and emerging profit-taking in precious metals amid dollar and yield strength.
  • The agriculture sector saw increased demand for grains, led by soybean oil and corn, while the livestock long hit a seven-year high.

Forex:

Speculators spent the days leading up to the US elections cutting exposure on both long and short positions. Overall, this left the gross dollar long versus eight IMM futures down just 3% to a yet elevated USD 17.7 billion. Exceptions to the risk reduction focus were the JPY and CAD, where speculators increased existing short positions in both. As per the table below, the biggest changes were a USD 3.9 billion equivalent reduction in the EUR short, a USD 1.7 billion equivalent reduction in the GBP long, and the mentioned USD 1.6 billion equivalent increase in the JPY short.

Non-commercial IMM futures positions versus the dollar in week to 5 November

Commodities:

In the latest reporting week, the Bloomberg Commodity Index rose 0.7%, partly reversing losses from the previous week, with gains in energy, industrial metals, and grains more than offsetting losses in precious metals and livestock. The reporting week included all market action until a few hours before Donald Trump and the Republican Party’s resounding victory in the US elections became known.

Renewed, but as it turned out, temporary strength across the energy sector saw speculators rush back into crude oil and distillates (diesel), lifting the combined WTI and Brent positions by 54% to 220,000 contracts, while short covering reduced the gas oil short by 65%. Elsewhere, emerging profit-taking across precious metals saw the gold net long reduced to a three-month low, while a second week of selling lowered the silver net long to a two-month low. Both metals, including platinum, traded lower on profit-taking ahead of the US elections, weighed down by dollar strength and rising Treasury yields.

The grains sector short position was further reduced amid strong demand for soybean oil due to surging prices, supported by robust export demand and a rally in rival palm oil prices driven by concerns over lower-than-expected outputs. The bean oil long reached a 20-month high, while corn flipped back to a net long for the first time in 15 months. The softs sector, meanwhile, saw mixed trading, with net selling in sugar and coffee being the main feature, while livestock length continued to increase despite some emerging price weakness.

Managed money long, short and net commodities positions in the week to 5 November
Energy: A 54% jump in the WTI and Brent crude long, left speculators exposed to the post election weakness.
Metals: Profit taking amid dollar and yield stength triggered broad selling, with copper the exception amid unfounded optimism over additional China stimulusof
Grains: The soybean oil long hit a 20-month high, while corn flipped to a net long for the first time in 15 months
Softs: Mixed week with light sugar and coffee selling the main developments while the livestock net long reached a fresh seven-year led by elevated positions in live cattle and hogs high

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:

1 Nov 2024: Commodity weekly: Some weakness seen ahead of critical week
31 Oct 2024: 
Crude prices seek stability ahead of key support and US elections
30 Oct 2024: 
Will the US election result spark a gold correction?
29 Oct 2024: 
Podcast: Electrification's surge impact on commodities and equities
28 Oct 2024: 
COT: Crude length cut; silver and platinum see strong demand
25 Oct 2024: 
Commodity weekly: Market jitters on the rise ahead of U.S. elections
23 Oct 2024: 
Crude prices stalled by two-sided market risks
22 Oct 2024: 
Gold and silver's remarkable run in four charts
22 Oct 2024: 
Podcast: The Trump trade enters the metal market
21 Oct 2024: 
COT: Dollar shorts squeezed; Shift in commodity exposure from energy to metals
18 Oct 2024: 
Commodity weekly: Gold's record-breaking run continues
17 Oct 2024: 
Copper prices decline amid doubts about China stimulus impact
16 Oct 2024: 
How high can gold and silver rally?
8 Oct 2024: 
Podcast: Navigating market shifts: Fed rate cuts, commodities and rising food prices
8 Oct 2024: 
Video: These commodities might be impacted by the US election
7 Oct 2024: 
Crude oil surge caps strong four-week rally for commodities
7 Oct 2024: 
COT: Broad buying momentum persists, led by Brent, copper and grains
2 Oct 2024: 
Q3 2024 Commodity Outlook: Gold and silver continue to shine bright
30 Sept 2024: 
COT: Fed and PBOC trigger largest weeklyl surge in commodities demand in a decade
27 Sept 2024: 
Commodity weekly: Industrial metals gain strength during a week of crude weakness
26 Sept 2024: 
Crude prices drop again as Saudi and Libya supply concerns grow
24 Sept 2024: 
Fed and PBOC add momentum to commodities market rebound
23 Sept 2024: 
COT: Dollar short reduced; Investment metals see strong demand ahead of FOMC
20 Sept 2024: 
Commodity weekly: Commodities boosted by bumper rate cut
20 Sept 2024 
Video: Gold or silver, which metal will perform the best
17 Sept 2024: 
With gold reaching new heights, silver shows potential
16 Sept 2024: 
COT: Record short Brent and gas oil positions add upside risks to energy
11 Sept 2024: 
Crude slumps amid technical selling and recession fears
10 Sept 2024: 
US Election: will gold win in all scenarios
9 Sept 2024: 
COT: Crude long cut to 12-year low; Dollar short more than doubling
5 Sept 2024: 
Can gold overcome the 'September curse'?
4 Sept 2024: 
Wheat rises on European crop worries
3 Sept 2024: 
Chinese economic woes drag down crude oil and copper
2 Sept 2024: 
COT: Commodities see broad demand as the USD slumps to a net short


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...
  • 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

  • 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...
  • 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 ...
  • 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

  • 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...
  • 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...
  • 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...
  • 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 ...
  • 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...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.