COT: Record gold buying pace continued ahead of FOMC

Commodities 5 minutes to read

Ole Hansen

Head of Commodity Strategy

Summary:  Hedge funds increased bullish bets across 24 major commodity futures by 44% during the week to June 18, the day before the FOMC meeting.


Saxo Bank publishes two 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.

To download your copy of the Commitment of Traders: Commodity report for the week ending June 18, click here


Gains were led by WTI crude oil, gold, soybeans, corn, wheat and sugar. At the other end, natural gas and Brent crude oil saw most of the selling. 
Crude oil was mixed, with a small combined reduction in the net-long being the result buyers returning to WTI for the first time in eight weeks while selling of Brent extended into a sixth. Since April 26 the combined long has been cut by 41% or close to 300k lots hence the bullish reaction to the post FOMC dollar weakness, the biggest drop in US oil stocks in six weeks and not least worries that tanker and drone attacks in the Mideast could escalate to something more dramatic.
Natural gas remained under attack from short-sellers as the price slid to a 1995 seasonal low on rising US stockpiles. Rising shale output has swamped a market where a sustained period of summer heat is now needed to boost demand from utilities and bring about short-covering. 
Strong buying of gold continued ahead of the post-FOMC surge to $1,400/oz. Funds increased the net-long by 21% to 190k lots, a 16-month high. During the past three weeks a record 157k lots has been bought and with this in mind the short-term focus turns to gold’s ability to hold onto these gains and reassure new longs that they have not bought another high but instead a potential new low. With that in mind the 2016 high at $1,375/oz and 2018 high at $1,366/oz are now the key technical levels that need to hold in order to avoid profit taking.
Copper’s bounce from key support at $2.6/lb supported a 15% reduction of the record short while renewed widening of platinum’s record discount to gold, approaching 600 dollars, helped drive a 36% increase in the net-short to 21k lots a 40-week low.
Strong buying of grains extended into a fifth week led by soybeans (net-short cut to 12-week low)  and corn (net-long at 1-year high)  as ongoing weather worries could further reduce the 2019 crop outlook. Primarily due to the continued short position in soybeans the combined long of the three major crops only reached 90k lots, less than one-quarter of the most recent seasonal peak from 2015. 
Soft commodities were mixed with short-covering halving the sugar net-short to a 7-week low. The cocoa net-long reached a one-year high before profit taking emerged to challenge the uptrend. 

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

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 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 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 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 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 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 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-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
3 Church Street, #30-00
Samsung Hub
Singapore 049483

All departments are available 08:30 to 17:30 Monday to Friday.

Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.