Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Head of Commodity Strategy
This content is marketing material.
COT on forex covering the week to 22 April, when the Dollar Index extended its slump to a fresh three-year low, saw speculators increase their gross USD short versus eight IMM futures to $14 billion, a six-month high. With the exception of the euro, all the other futures contracts saw net buying, led by GBP and CAD, while the JPY long reached a fresh record high at 178k contracts, or USD 15.8 billion equivalent, by far the most popular long ahead of the euro (USD 9.3 billion). Besides the elevated USD short, and despite continued short covering since December, the CAD short remains the second biggest at USD 5 billion equivalent.
In commodities, the latest reporting week to 22 April covered a period where markets continued to recover from the market meltdown that followed Trump’s early April ‘Liberation Day’ speech. The Bloomberg Commodity Index traded up 1.6% on the week, primarily led by gains across precious and industrial metals, as well as softs and livestock, while the energy sector saw strong gains in crude and fuel products being offset by another big loss in natural gas.
Hedge funds showed a mixed response to these developments, the most interesting being a fifth week of gold selling—reducing their net long to a 13-month low—despite prices briefly hitting an all-time high at USD 3,500. Across the other metals, a net short position was maintained in range-bound platinum; silver’s rebound received a modest buying response, while the HG copper net long saw a small increase as the premium over London widened to 16% as traders continue to guess which level the US administration eventually will slap on imports into the U.S.
In crude oil, a 67,000 contract increase in the combined Brent and WTI net long to 242k contracts was primarily driven by short covering from macro-focused funds reducing recession-related trades, while it will probably take a break above key technical resistance for the gross long to start rebuilding—in Brent above USD 69, and WTI above USD 65.
The agriculture sector saw net buying, supported by demand for soybeans, wheat, cotton, and the three livestock contracts, not least live cattle, which trades near an all-time high. In grains, funds have now held a net short in the CBOT wheat contract for a record 147 weeks, since June 2022, while the Kansas short rose to near the 2019 record at 57k contracts.
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:
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:
Recent commodity articles:
25 April 2025: Commodities weekly Energy slump overshadows strength in gold and agriculture