Head of Commodity Strategy, Saxo Bank Group
Summary: Gold and silver were sold off heavily in the week ending March 19 while oil bulls continued their rampage, boosted by the latest outbreak of rebellion in Libya.
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.
To download your copy of the Commitment of Traders: Commodity report for the week ending March 19, click here
Hedge funds sold commodities for the first time in four weeks during the week to April 2. The 85k contract reduction in the net-long to 537k was driven by heavy selling of gold and silver as the risk-on rally in stocks continued. The USDA acreage report triggered renewed selling of corn and soybeans while short-covering supported sugar and cocoa.
The grain sector saw renewed selling in the aftermath the USDA’s March 29 acreage and stock reports. Not least corn which at 247k contracts remains by far the most shorted grain contract at this stage. Ahead of the important planting and growing season the combined net-short across the three major crops of corn, soybeans and wheat has never been higher for this time of year.
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.