COT: Gold sold despite multiple tailwinds

Ole Hansen

Head of Commodity Strategy

Summary:  The Commitments of Traders report covering positions held and changes made by money managers in the week to May 26 found that speculators maintained strong buying interest in crude oil while selling was most noticeable in natural gas, gold and the three major crops.


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, May 26. A week were global stocks continued higher with some, especially in the U.S. reaching new cycle highs. Broad weakness hit the dollar, a development if continued could be supportive for commodities. 

The Bloomberg Commodity Index was flat on the week with continued gains in energy, not least crude oil, being off-set by weakness across most metals. Despite a relatively neutral price behavior, funds continued to increase bearish exposure in the grain sector. In soft commodities sugar short covering continued while the cocoa short increased just before the price jumped. 

Energy: Strong buying of crude oil continued with the combined net-long in WTI (+14.3k) and Brent (+14.7k) reaching 536k lots, a four months high. The WTI long reached 363k lots, the highest since September 2018 while Brent, the recent laggard, reached 173k lots, well below the January peak at 429k lots.

Metals: The week to May 26 was a period where most metals paused with gold and silver both falling by 1.7% while copper was flat on the week. Gold's lack of hedge fund engagement continued with the net-long seeing another reduction of 14% to 24k lots, the lowest bet on rising prices in almost 12 months. An exodus from CME gold futures following the March dislocation to spot may have played its part with funds instead moving some of their long term exposure to exchange-traded funds. Total holdings in bullion backed ETFs broke above 100 million ounces for the first time last week. 

Silver's strong rally following the March collapse paused but the established momentum helped increase the net-long by 26% to 27k lots, still 42k lots or 60% below what funds held before the mentioned collapse. Silver's recent outperformance of gold may slow after the gold-silver ratio reached a technical target at 95 (ounces of silver to one ounce of gold).

The HG copper short was almost cut in half with funds not yet benefiting from the recovery seen in this important industrial metal. Today the price in early trading moved higher again to almost challenge $2.50/lb, a level that provided support from 2017 before becoming resistance following the March collapse below. 

Agriculture: Broad selling of the three major grains continued, not least corn where the net-short reached 276k lots,  the most bearish position held this time of year in at least ten years. A slump in ethanol demand (now recovering as oil rally), a rapid planting progress and doubts about export strength, have kept corn anchored close to the psychological key support level at $3/bu. 

Sugar short-covering continued as bio-fuel related demand recovered. The fund long in coffee was cut by 37% as the technical outlook deteriorated further following the break back below $1/lb.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

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.

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