COT: Record gold short while oil sees no selling appetite

COT: Record gold short while oil sees no selling appetite

Ole Hansen

Head of Commodity Strategy

To download your copy of the Commitment of Traders: Forex report for the week ending August 14, click here

Commodities have experienced a couple of bruising weeks with the Bloomberg commodity index seeing all its gains for the year wiped out at one point last week. This came in response to increased worries about the direction of global growth and demand given the ongoing China-US trade war and the Turkey crisis highlighting the risk to emerging market economies challenged by high levels of dollar debt, a stronger USD, and rising costs of funding. 

Despite of these headwinds, the total net-long futures and options position held by hedge funds across 26 major commodities only dropped by 3% in the week to August 14. In energy, the selling of crude oil and products was off-set by a big jump in natural gas while the metals sector continued to see broad-based selling. The grains sector was mixed while all four soft commodities were sold. 

Fund positioning
Hedge funds continued to reduce bullish oil and product bets in response to increased worries about an EM slowdown. Since hitting a record above one million lots (one billion barrels) on March 30, the combined long in WTI and Brent has now seen a 37% reduction. Given its role as the global benchmark, Brent crude oil has seen the biggest reduction to 336,000 lots, down 47% since March. 

Despite the deteriorating outlook it is worth noting that both long and short positions were reduced last week. The gross-short in WTI and Brent of just 66,000 lots, however, remains close to the lowest in five-years. This highlights the limited selling appetite ahead of the expected Iranian supply drop but also how unprepared funds are should oil break below key support (i.e. the 200-day moving average). 
Brent and WTI crude oil managed money position

Gold remained under pressure last week from the stronger dollar and EM weakness. In response to the technical break below support at $1,205/oz, the net-short jumped by 13% to a fresh record of 77,000 lots. The market is currently transfixed by the negative impact on those EM economies maintaining large external debt in dollars at a time where both the dollar and funding costs are rising.

With such an elevated short, the risk of a snap recovery has risen and on that basis the market will be pay extra attention to the dollar, which has weakened a bit in response to new low level trade talks between the US and China, as well as Federal Reserve chair Jerome Powell speech on Friday at the Fed’s annual Jackson Hole conference.

Should Powell unexpectedly blink and signal a slowdown in the tightening process, the dollar could get sold and potentially send gold on a path to recovery. In silver the net-short jumped by 61% last week but at just 20,000 lots it remains just half of the record from April.

COMEX gold and silver

Copper, often seen as a gauge of the global economy’s health given its diverse usage profile, has falling by more than 20% from the four-year high reached just a few months ago back in June. Last week saw copper troubled by news that a potential supply disruption from the world’s largest mine in Chile that had been looming for weeks showed signs of being averted. Hedge funds, however, remained undecided in the week to August 14 with reductions in both long and short positions helping to cut the net-short by just 2% or 507 lots. The cut-off day, though, was just before the price slumped by 4% last Wednesday in response to Chinese growth worries.

Grains were net-bought despite the bearish WASDE report on August 10 which sent soybeans and corn sharply lower before recovering later in the week. The net-long in CBOT wheat reached a fresh eight-year high at 67,000 lots.
Fund positioning
All four soft commodities were sold as the price outlook continued to deteriorate, not least sugar and coffee as EM currency weakness hit the BRL The net-short in coffee hit a fresh record of 98,000 lots while the above mentioned WASDE and much weaker Turkish lira helped reduce the cotton net-long for a second week.
Soft commodities

Quarterly Outlook

01 /

  • 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 ...
  • 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...
  • 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/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

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. Android is a trademark of Google Inc.

©   since 1992