COT: Investment metals shine in a week of broad based selling

Ole Hansen

Head of Commodity Strategy

Summary:  Changes in speculative positions held by funds across 24 commodity futures during the week to August 27. Hedge fund selling continued with precious and platinum group metals being the noticeable exception. Hardest hit were WTI crude oil, HG Copper, corn and sugar. Net-short positions are currently held in most agriculture commodities


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 kept up the selling pressure on commodities during the week to August 27. The combined long across the 24 major commodity futures tracked in this dropped by 55% to just 86,300 lots, the lowest since January 2016. 

Selling was broad-based with precious and platinum group metals being the noticeable exception. Hardest hit were WTI crude oil, HG Copper, corn and sugar. Net-short positions are currently held in all agriculture commodities except for cattle and hogs.  

The net-long in gold notched higher by 1% to reach a record 287,850 lots. Interestingly the gross-short rose by the most in six weeks, potentially driven by spread trades against silver as it broke above $17.50. Platinum saw strong buying with traders taking a closer look at its record discount to gold. HG copper meanwhile attracted renewed selling with the ongoing and escalated trade war sapping the outlook for demand.

WTI crude oil was sold following the Chinese announcement that a 5% tariff would be added to import of US crude oil from September 1. The news resulted in longs being cut while fresh shorts were added. Brent longs meanwhile saw a small 2% increase with both long and short sellers increasing exposure. 

Hedge funds continued to increase bearish bets on agriculture commodities with net-short positions seen in all grain and soft commodities. This as the trade war, ample supply and now also the stronger dollar continue to take its toll on the sector. 

 

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.

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