Head of Commodity Strategy
Summary: Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 30. A week that covered the markets overall negative response to the hawkish message from Federal Reserve Chairman Powell at Jackson Hole. Growth and interest rate sensitive commodities were sold while key agriculture commodities, supported by tightening fundamentals attracted continued buying.
Energy: Crude oil was mixed with net selling of WTI being more than offset by demand for Brent where fresh buying was seen after the price approached support in the low-90 dollar per barrel area. Across the product market positions were adjusted according to the latest developments that had seen slowing demand for gasoline while the gas-to-fuel switch supported demand for diesel contracts, both the ULSD (Heating oil) contract traded in New York and the London traded GasOil contract.
Metals: Precious metals saw continued selling with speculators cutting their gold net long by 32% to 20.7k lots while increasing net short positions in silver, platinum and copper.
Agriculture: Funds added length in grains for a fifth week, led by corn after the US ProFarmer Tour reduced the crop outlook. The soybean complex was mixed while length was added to Kansas wheat and the CBOT short was reduced. The soft sector saw net buying of all four contracts fresh longs being added to sugar, coffee and cotton while the cocoa net short was reduced.
The forex market responded very muted to dollar strength that followed the Jackson Hole speech by Federal Reserve Chairman, Jerome Powell. Overall the gross dollar long against nine IMM forex futures and the dollar index rose by 3% to $18.5 billion, with selling of euro, sterling and yen being partly offset by demand for CAD, AUD and MXN. The short position held in IMM Euro contracts reached 47.7k contracts or nearly €6 billion, the biggest bet on a weaker euro since March 2020.
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 reasons why we focus primarily on the behavior of the highlighted groups are:
2024: The wasted year
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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