Head of Commodity Strategy
To download your copy of the Commitment of Traders: Commodities report for the week ending June 26, click here.
Trade war concerns, a stronger dollar and signs of an economic slowdown among key EM countries, led by China, continued to take its toll on money managers' appetite for commodities last week. During the week to June 26 net-selling was seen in 19 out of the 24 futures contracts tracked in this update and following four weeks of continued selling the combined net-long has fallen by 617,000 lots to 1.3 million, the lowest since January 2.
The only contract seeing noticeable buying was WTI crude with the story otherwise being the continued selling of gold and copper and not least the three major row crops of corn, soybeans and wheat.
Crude oil was mixed during a week which saw the spread between WTI and Brent collapse while the WTI prompt spread surged. Both of these events were triggered by a supply outage from Canada which may last through July and support a continued tightening at Cushing, Ok., the delivery hub for WTI crude oil futures. As a result the Brent net-long was cut by 1% while bullish WTI crude oil bets jumped by 25% to 391k lots, a 7-week high. A collapse in the WTI crude oil gross-short to just 20k, at 6-year low, lifted the long/short ratio to almost 21, a 7-year high.
Funds cut their gold net-long by 82% to just 4,000 lots, a 17-month low. The continued capitulation was driven by the biggest two-week jump in the gross-shorts since November 15 as the technical outlook deteriorated below $1,285/oz. The silver net-long exceeded that of gold for the first time since March 2017.
HG Copper longs capitulated in response to a deteriorating macroeconomic outlook led by fears of a Chinese slowdown driven by trade wars and slowing credit growth. The net-short in platinum meanwhile hit a fresh record of 26,000 lots.
The grains sector witnessed another week of heavy selling with funds now once again holding a short position in all of the three major crops. Trade war concerns (US corn to Mexico and soybeans to China) and improved US growing conditions helped create a perfect storm of negative price pressure during June.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
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