Quarterly Outlook
Q1 Outlook for Traders: Five Big Questions and Three Grey Swans.
John J. Hardy
Global Head of Macro Strategy
Strap yourself in for key market questions that must be answered in 2026.
COT update: Silver surges without speculator backing as FX focus shifts to yen
Ole Hansen
Head of Commodity Strategy
Key points:
- Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week ending Tuesday, 20 January 2025.
- In forex, the aggregate dollar position returned to neutral after EU–US related selling of the euro. An elevated yen short ahead of the BOJ, combined with renewed rhetoric around potential Fed and Japanese intervention, triggered a sharp drop in USDJPY.
- With silver surging to USD 110, up 52% this month, the question of who is buying remains front and centre. The answer does not lie in futures or ETFs, both of which continue to register net selling.
- In energy, Length was added in both WTI and Brent, lifting the combined net long well above levels seen one month ago. The sharp rally in natural gas was met with profit-taking, while broad-based weakness persisted across the agriculture sector.
Forex:
In forex, the aggregate dollar position versus eight IMM futures ended the reporting week essentially flat, after speculators responded to the USD-EU standoff over Greenland by selling 21k euro contracts, equivalent to USD 3.1 billion. Later in the week, Trump’s TACO saw the euro recover strongly, before the attention turned to Friday’s sharp move in the yen. The yen strengthened markedly after both the Bank of Japan and, later in the day, the Federal Reserve contacted bank trading desks requesting prices — a development that in the past has been viewed as a potential precursor to intervention. Ahead of Friday’s sharp reversal in USDJPY from above 159 to a one-month low below 156, speculators held the largest yen short position in 14 months. While the initial BOJ and Fed actions may have triggered some short covering, USDJPY may need to fall further before the yen begins to build momentum on its own. The remaining six currencies saw limited action, with positioning skewed toward the buy side, most notably in GBP and AUD, the latter seeing its net short position fall to a 13-month low.
Who is buying silver?
With silver surging to USD 110, up 52% this month, the question of who is actually buying continues to surface. Available data from COMEX futures positioning and ETF holdings suggest that net selling — not buying — has been the dominant theme over the past month.
From a December peak of 871 million ounces, total ETF holdings have been reduced by 26.4 million ounces. At the same time, speculators in COMEX futures — including managed money and other reportables — have cut their net long by 56.6 million ounces (11,320 contracts), leaving positioning at an almost two-year low of 123 million ounces.
Some of the price strength may be explained by industrial demand from producers concerned about potential supply shortfalls. However, prices are now approaching levels where industrial demand — which in a normal year accounts for around 60% of total silver consumption — could eventually begin to suffer.
This leaves retail investment demand for coins and bars, and not least very strong and persistent buying from China. Despite today’s surge to USD 110 per ounce in London, the Shanghai premium has continued to widen, rising to more than USD 14. As long as this premium remains elevated, traders and investors elsewhere are likely to feel emboldened in their belief that London and New York prices remain too low.
With China acting as such a major and persistent source of support, attention now turns to the Lunar New Year holiday, during which the Shanghai Futures Exchange will be closed from 16 to 23 February. Should profit-taking eventually take hold, some of that pressure may start to emerge ahead of the Chinese market shutdown.
Commodities continued
Elsewhere, across the other metals gold saw modest net buying for a second consecutive week, lifting the net long to 139k contracts. This remains well below last year’s peak of 231k contracts but, given current prices, still represents a nominal exposure of USD 67 billion. Copper meanwhile saw light selling for a fourth week, reducing the net long to 61.7k contracts, down 19% since the 23 December peak.
In energy, length was added in both WTI and Brent, lifting the combined net long to 236k contracts from near flat just one month ago. Overall, the WTI net long represents only 2.7% of open interest, while the Brent net long of 217k contracts accounts for around 8%. The 14.3% spike in natural gas — which extended further later in the week — was met by reductions in both long and short positions, reflecting spiking volatility and possible concerns that the winter storm-related surge could prove short-lived.
Broad weakness across the agriculture sector triggered continued selling of soybeans and wheat, as well as across the softs, led by sugar and cocoa. The two notable exceptions were continued demand for soybean oil and hogs.
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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's 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
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.
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The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
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