COT: Agriculture spec short on the rise; gold buying resumed

Ole Hansen

Head of Commodity Strategy

Summary:  Changes in speculative positions held by funds across 24 commodity futures during the week to August 20. Speculators were broad-based sellers of agriculture commodities with funds holding net-short positions in all but a couple. Gold and silver saw fresh buying while oil was mixed.


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.

Speculators were broad-based sellers of agriculture commodities with funds holding net-short positions in all but a couple. Last week the combined net-short across grains, softs and livestock reached 169k lots with cocoa, live cattle and not least corn seeing most of the selling. Precious metal buying resumed ahead of key risk events from FOMC minutes to Fed Chair Powell's speech at Jackson Hole. Crude oil was mixed with WTI buying seen ahead of Friday's announcement that China would slap a 5% tariff on US crude oil imports from September. 

Of the three major crops corn took the biggest hit. After having sold 101k lots during the week funds are once again holding a net-short position. Ample supply, despite one of the wettest growing seasons on record, together with worries about demand has kept key crops under pressure during the growing season. Ahead of the tariff announcement last Friday speculators had sold 6k lots of soybeans.

The small price setback in gold and silver did nothing to dampen the bullish sentiment. The net-long in gold rose by 7k lots on a combination of short-covering and fresh longs while the 27% jump in silver longs was primarily driven by short-covering. HG Copper was bought for a second week and during this time the net-short has been reduced by 17%, primarily on short covering. The trade war escalation on Friday helped trigger renewed selling with the price closing at the weakest level since May 2017.

Being just one tariffs headline away from renewed weakness the recent recovery in crude oil failed to trigger much excitement with long and short positions being reduced in both WTI and Brent. The combined net long was close to unchanged given the continued switch from Brent to WTI crude oil. China’s announcement on Friday that a 5% tariff would apply on US crude oil imports from September occurred after short-sellers in WTI had cut their gross-short by 25%, the biggest retreat in year
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 Bank 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. This content is not intended to and does not change or expand on the execution-only service. 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

International

Trade responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.