COT: Commodity selling accelerated ahead of US midterms as euro and Aussie shorts hit extremes

Commodities: A sea of red

The latest reporting week to 3 November captures speculative positioning across major commodity futures immediately ahead of the US midterm elections, providing a snapshot of how traders approached a major political risk event that ultimately delivered a dramatic Democratic sweep of Congress. In the week leading up to the vote, the Bloomberg Commodity Index (BCOM) slumped 3.3%, with all sectors declining, led by precious metals and energy.

Hedge funds responded by becoming net sellers across all 25 major commodity futures contracts tracked in this update, an unusually one-sided move reflecting broad-based risk reduction ahead of the election. While most contracts saw a combination of long liquidation and fresh short selling, the reductions in Brent, soybeans and soybean meal were driven predominantly by long liquidation, while corn saw a particularly sharp increase in outright shorts. Overall, the combined net long slumped by 393k contracts, or 33%, to 783k, its lowest level in several months.

Energy: The combined crude oil net long fell by 81.3k contracts to 268.4k, a three-month low, as prices weakened on renewed hopes for a US-Iran deal. Meanwhile, the combined natural gas net short reached a fresh six-year high of 216.6k contracts, with persistent price weakness encouraging further short selling, inadvertently leaving prices exposed to the risk of US cold snap supporting prices.

Metals: Continued silver weakness and gold's technical break below USD 3,970 triggered broad risk reduction across the sector. Silver's net long shrank to just 2.7k contracts, while platinum joined palladium in net short territory for the first time since May 2025. Gold's net long fell to a five-month low of 104k contracts, while copper's dropped to a 14-month low of 34.4k, down from a September peak above 82k contracts.

These positioning shifts help explain the strong post-election rebound, as the Democrats' midterm sweep wrong-footed bearish traders and triggered aggressive short covering, particularly among CTAs. However, with the initial recovery driven largely by position adjustments rather than renewed buying conviction, a sustained rally will require more fundamental support. That said, relatively light positioning leaves the sector sensitive to shifts in the technical and fundamental outlook, potentially amplifying price moves as year-end approaches.

Agriculture: In grains, the dramatic unwind from September's record net long above one million contracts continued. Reduced longs across the soybean complex were increasingly offset by growing shorts in corn and wheat, leaving the combined grains and oilseeds net long at just 166k contracts, an 83% reduction in six weeks. The most striking reversal has been in corn, where an 18% price slump since September has driven positioning from a record net long of 431k contracts to a net short of 23k. Elsewhere, all soft commodities saw net selling, led by sugar, which only three weeks earlier had reached its highest net long in five years.

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, covering positions held as of the previous Tuesday. The reports break down open interest in futures markets into different categories of market participants, depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap Dealers, Managed Money, and Other Reportables
Financials: Dealer/Intermediary, Asset Manager/Institutional, Leveraged Funds, and Other Reportables
Forex: A broader breakdown between commercial and non-commercial participants, with the latter generally viewed as speculators

The main reasons we focus primarily on the behaviour of speculators, such as hedge funds and trend-following CTAs, are:

• They are more likely to have tight stops and no underlying physical exposure that needs to be hedged
• This makes them more reactive to changes in fundamental or technical price developments
• Their positioning provides insight into major trends, while extreme positions can also help identify when a reversal or correction may be looming

It is worth noting that this group tends to anticipate, accelerate and amplify price moves that have often already been set in motion by fundamentals. As followers of momentum, these traders typically buy into strength and sell into weakness. As a result, they are often found holding their largest long exposure near the peak of a cycle or their largest short exposure ahead of a trough in the market. For that reason, positioning extremes can be useful contrarian indicators, but rarely in isolation: timing still depends on a fundamental or technical catalyst that changes the prevailing trend.