Head of Commodity Strategy
Summary: The latest COT report for the week ending September 25 reveals a strong uptick in bullish sentiment on the part of leveraged funds. Demand was focussed on energy but buying was noted across most sectors.
The Brent crude oil rally to a new four-year high above $80.50/b attracted continued buying with the net-long rising 28,465 lots to 496,343 lots, an 18-week high but still well below the April record at 632,000 lots. The long-short ratio, meanwhile, jumped to a stretched 19.3 (longs per one short) on a combination of longs being added and the gross-short falling to a seven-year low. WTI, meanwhile, was sold for a third consecutive week.
Gold’s range bound behaviour around $1,200/oz attracted limited interest while silver shorts were covered as it began recovering from a multi-year low against gold. Platinum and copper both saw strong buying as industrial metals found a bid after China announced tax cuts and increased (infrastructure) spending.
Grains were bought on speculation that a worst case scenario may have been priced in by now. On Friday, however, the release of quarterly US stocks confirmed a continued challenging environment with soybeans and corn stocks both being higher than expected.
The sugar net-short jumped 62% after the early September recovery was completely reversed on bearish supply news out of India. Arabica coffee’s record short was cut by 3% in response to a recovering Brazilian real. On Friday the December contract closed at $1.0245/lb and above its 20-day moving average for the first time in more than three months.
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.
