XAUUSD XAUUSD XAUUSD

COT: Metal indigestion after week of strong speculative buying

Ole Hansen

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 Tuesday, November 15. A week that saw markets respond, prematurely as it turned out, to market friendly FOMC and China Covid news. Developments that saw specs cut their dollar long to a 17-month low while rushing into precious and industrial metals. Elswhere crude oil and corn was sold while sugar buying hit a sweet spot.


Saxo Bank publishes 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.
What is the Commitments of Traders report?

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:

  • 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

 

Financial Markets Daily Quick Take
Saxo Market Call Daily Podcast


This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, November 15. A week that saw stock markets surge higher while the dollar and bond yields dropped on - as it turned out -premature speculation the FOMC was approaching peak hawkishness. China focused commodities, such as industrial metals received a boost on signs, again prematurely, that the government was easing its zero covid tolerance approach. 

 

All developments that helped cut the speculative dollar long to a 17-month low while triggering a major round of speculative buying across precious and industrial metals, the latter partly explaining the correction currently seen across metals with the selling of recently established longs weighing on markets.

Commodities

The Bloomberg Commodity traded up 1% during a very mixed week for the sector which saw selling of energy and livestock being more than offset by gains in precious and industrial metals, as well as softs. Responding to these developments speculators turned major buyers of metals and softs, led by gold, copper and sugar while energy and grains were sold led by crude oil, corn and soybeans. 

Energy

Speculators turned net sellers of crude oil following a failed early November attempt to break higher. With China optimism turning to pessimism and an important part of the US yield curve signaling an increased risk of a recession, speculators had already begun reducing their crude oil exposure before selling accelerated ahead of the weekend. In the week to November 15, they cut bullish bets on WTI and Brent by a total of 52k contracts or 5.2 million barrels to 400k contracts,on a combination of long liquidation (-39k) and fresh short selling (+13k). All three fuel products also saw bullish bets being reduced as the short-term demand outlook showed signs of softening.

Metals

Aggressive buying of gold on dollar and yield weakness in the week to November 15 and the subsequent failure to break above key resistance in the $1800 area has left the metal exposed to a setback with the yellow metal now focusing on $1735 support ahead of $1720. During a two-week period to last Tuesday, speculators bought 80,000 contracts or 8 million ounces to record the strongest two-week buying pace since June 2019. The result being the net position flipping from a short to 41k contract net long, a three-month high. Copper buying lifted the net by 57% to 25k contracts, a seven-month high, with silver and platinum also seeing strong net buying.

Agriculture

The total net long across the six major grains contract dropped to a three-month low at 430k contracts with the main driver being corn, which despite trading unchanged on the week saw speculators dump 61k contracts, the biggest one-week clear-out of longs since August 2019. The wheat net short extended to a 27-month high at 47k contracts with soybeans and soymeal also suffering setbacks. Going against the trend we saw another small increase in the soybean oil long to 110k contracts, a 21-month high.


In softs, the 7% rally in sugar help drive a record 89k contract jump in the net long to 166k contracts. The Arabica coffee net short jumped by 1/3 and after four weeks of selling it reached a 28-month high at 19k contracts. Cocoa meanwhile flipped back to a net long while the cotton long received a 24% boost. 

Forex

In forex, flows turned decisively against the dollar, a day before Fed Chair Powell delivered his hawkish comments which only managed to trigger some temporary dollar strength. Before this reporting week, the Greenback had increasingly been losing steam against several of the nine IMM forex futures tracked in this report. The bulk of the net dollar selling had up until recently been mostly against the euro which since late August has seen €19 billion of net buying, reversing the net position from a 48k lots short to a 106k long. This past week buying accelerated with the net long jumping 41% to a 17 month high. Combined with an aggressive 24% reduction in the JPY net short and a 250% jump in the MXN net long, the combined dollar long ended up being reduced by 59% to just $5 billion, the weakest belief in a stronger dollar since August last year.

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 is not intended to and does not change or expand on this. 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-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.