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 August 9. A relatively quiet week where a continued improvement in risk appetite drove stocks higher while softening the dollar. Some commodity positions, with crude oil the major exceptions, showed signs of having reached a trough following weeks of heavy selling
Energy: Speculators responded to continued crude oil weakness by cutting bullish bets in WTI and Brent crude by a combined 14% to a pre-Covid low at 304.5k lots. The reductions were primarily driven by long liquidation in both contracts following a demand fear driven breakdown in prices. Gas oil and gasoline longs were also reduced.
Metals: Buying of metals extended to a second week led by gold which saw a 90% jump in the net long to 58.2k lots. Overall, net short positions were maintained in silver, platinum and copper with the latter seing a small amount of fresh selling due to profit taking on recently established longs.
Agriculture: Grains were mixed with corn and soybeans seeing continued buying ahead of Friday's WASDE report while the CBOT corn net short jumped 36% to 20k lotsand the Kansas net long was cut to a two-year low. The total grain long rose for second week having stabilised around 300k lots having collapse from a near record 800k lot on April 22.
Soft commodities saw elevated short positions in sugar and cocoa being maintained with price gains in coffee and not least cotton supporting a small increase in their respective net longs. This before Friday's surge in cotton which left it up 13% on the week after the US Department of Agriculture slashed the US crop forecast by 19% to a 12-year low. Driven by a high level of abandonment of fields in the drought-stricken Southwest.
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:
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
