This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to last Tuesday, June 6. Supported by a softer dollar it was a week that saw continued stock market gains and the VIX index slump to a post-pandemic low while bond yields held steady as the market tried to gauge the result of the upcoming FOMC meeting amid mixed macro-economic signals. A strong start to June helped lift the commodity sector, and with that the speculative interest across all sectors.
Commodity sector: Money managers which include leveraged traders such as hedge funds and trend-following CTA’s remain key actors across the commodity market, and on a weekly basis the US CFTC (Commodity Futures Trading Commission) through its Commitment of Traders Report give insight to the positioning among this group of traders. Instead of causing them, this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy more often than not 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.
In the week to June 6, the Bloomberg Commodity Index climbed 2.1% as May weakness was replaced by early June strength driven by a softer dollar, speculation that the Chinese government may step up its support for the economy, hot and dry weather raising concerns across the agriculture sector and Saudi Arabia’s latest attempt to prop up the oil market. Gains were seen across all the major sectors led by livestock (+7%), grains (+4%) and energy (+2.2%).
Speculators, responding to these across-market gains, lifted their net long across 24 commodities by a combined 117k contracts to 775k, the biggest one-week addition in seven weeks. As per the table below just a handful of commodities saw net selling amid a broad recovery in risk appetite, with demand being led by crude oil, diesel products, gold, copper, and most agricultural commodities, led by soybeans, cattle, and hogs.