This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to last Tuesday, June 13. A week that saw continued strong gains across global stock markets and US bond yields rising ahead of last week’s FOMC meeting. In forex, another week of fresh dollar weakness did not prevent a continued reduction in bearish dollar bets to a three-month low while broad commodity gains supported a 20% jump in bullish commodity bets, primarily driven by rising demand for grains and industrial metal market.
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 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.
In the week to June 13, the Bloomberg Commodity Index climbed 0.7% as May weakness continued to be replaced by 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 primarily focusing on the grains (+2.4%) and industrial metal sector (2.1%) while precious metals (-0.8%) and energy (-0.9%) traded softer.
Speculators, responding to these latest developments by lifting their combined net long across 24 major commodity futures by 153k contracts, or 20% to 928k contracts. Primarily driven by short covering in the grains market and copper and fresh longs being added to the softs sector. Energy was mixed with crude oil selling being offset by demand for gasoil and natural gas while precious metals, led by gold, saw net selling ahead of the FOMC meeting.