COT: Oil bought, gold and dollar sold on continued vaccine optimism

Ole Hansen

Head of Commodity Strategy

Summary:  This summary highlights positions and changes made by speculators such as hedge funds and CTA's across commodities and forex futures and options up until last Tuesday, November 24. A week where the market behavior was dictated by continued vaccine optimism and the formal start of President-elect Biden's transition, news that removed the threat of a contested transfer of power.


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.

The below summary highlights futures positions and changes made by hedge funds across commodities and forex up until last Tuesday, November 24. The reports, normally published on Friday’s by the U.S. CFTC was delayed due to last week’s Thanksgiving holiday.

During the week, the market behavior was dictated by continued vaccine optimism and the formal start of President-elect Biden’s transition, news that removed the threat of a contested transfer of power. These market-friendly developments helped lift the S&P 500 by 0.7% while the Dow Jones topped 30,000 for the first time. The dollar traded softer, ten-year U.S. bond yields ticked higher by a couple of basis points while the Bloomberg Commodity index rose by 1.1%, led by strong gains in crude oil, copper and agriculture while gold and silver both took a hit.

Commodities

Speculators increased bullish bets across 24 major commodity futures to a near three-year high in the week to November 24. The 3% increase to 2.3 million lots was primarily driven by those commodities, most noticeable crude oil, benefitting from a vaccine driving recovery in growth and demand. Gold, the safe haven metal, saw another slump while copper and platinum saw increased buying interest. The agriculture sector was mixed with  another week of profit taking in soybeans and sugar being more than offset by strong buying of corn, coffee and not least cocoa.

Forex

The raised level of market risk appetite driven by vaccine optimism and reduced risk of a contested U.S. presidential election helped softening the dollar during the week to November 24. The weakness, most prominent against CAD, AUD, NZD and MXN, helped drive a 12% increase in the overall dollar short against ten IMM currency futures and the Dollar Index to $25.3 billion. Still well below the -$34.9 billion peak back in August.

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

 

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/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Due to coronavirus controls, with many of our staff working from home, we are not able to meet with clients in our reception at present, unless by appointment in exceptional circumstances. We remain at your service on the phone and email details below. Thank you for your understanding.

*Please expect very long waiting times on the line when calling us, we advise you to send us an email instead.

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. 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

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.