Log in Open account
International
CFDs and forex (FX) are complex instruments and come with a high risk of losing money rapidly due to leverage. 62% of retail investor accounts lose money when trading CFDs with this provider. 
Show more
CFDs and forex (FX) are complex instruments and come with a high risk of losing money rapidly due to leverage. 62% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX, or any of our other products work and whether you can afford to take the high risk of losing your money.
Show less
background image

COT: Speculators add further fuel to gold rally

Commodities
Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities, forex and bonds during the week to last Tuesday, November 28. A week that saw a continued bond market rally and a softer dollar support risk sentiment across markets, except the commodity sector which saw broad losses led by energy and grains more than offset continued buying of gold and silver

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.

What is the Commitments of Traders report?


The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:

  • 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

Do note that 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.

This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, November 28. A week that saw the biggest bond market rally in years receive some additional tailwind after Fed Governor Waller, normally a reliable hawk, suddenly converted to the dovish camp, and the market concluded that Waller would not have expressed such a major change in stance without a nod from Fed chair Powell. Global stock markets continued their early Santa rally supported by the mentioned drop in Treasury yields and rising rate cut expectations, the dollar slumped while the commodity sector traded lower with led by broad losses in energy, copper, grains, and livestock. 

Commodities:


The commodity sector traded lower, with the Bloomberg Commodity index suffering a 1% loss with 18 out of the 24 major commodity futures tracked in this update trading lower on the week, led by natural gas, crude oil, grains, and livestock. Among the few commodities showing gains we find gold and silver as well as cocoa and coffee. Overall, the net selling from speculators was concentrated in natural gas, corn, soybeans, wheat, sugar and hogs. 

Note on gold.


Since the cutoff last Tuesday, when gold closed at $2040, the yellow metal continued higher, supported by the rally in bonds and softer dollar following Waller’s dovish comments. On Friday Fed Chair Powell tried but initially failed to dial back bullish expectations, the result being a record closing high leading to follow-through buying in Asia overnight to a fresh record above $2030. Speculators, such as hedge funds & CTAs, as seen in the table below, remain the key drivers behind the latest run up in gold with ETF investors, such as long-only asset managers, selling into the rally. With five rate cuts fully priced in for 2024, there is little room for error in the short-term, and it raises the risk of disappointment should incoming economic data fail to support the current gold bullish narrative. Speculators are not 'married' to their positions and will adjust if the technical and/or fundamental outlook changes. 

We maintain a bullish outlook for gold into 2024 in the firm belief that rates have peaked, and that Fed funds and real yields will continue to trend lower. However, with a great deal of easing already priced into the market, the chance of a straight-line rally is unlikely, and both silver and gold will continue to see periods where convictions might be challenged. It is also worth noting the continued lack of demand from ETF investors, not least asset managers who remain sidelined amid the wide gap between gold and US real yields as well as the current high cost of carry which will only come down when the Federal Reserve starts cutting rates. 

From a technical perspective spot gold reached a Fibonacci extension target overnight at $2130, and while a golden cross between the 50- and 200-day moving averages support the bullish setup, a pull back towards $2057 (38.8% Fibo) or even $2033 (50% Fibo) cannot be ruled out in the short term.

4olh_cot1
4olh_cot2
Energy: WTI was sold and Brent bought ahead of last week’s delayed OPEC+ meeting. Overall, the belief in higher prices remained low with the combined long at 265k being near the lowest of the year. Products meanwhile were bought with support from an extended refinery maintenance season while the short sellers lifted the natural gas short.
4olh_cot3
Metals: Gold length jumped 26% to 144k lots, a six-month high, silver up 55% to 26k and not far below the year high around 30k, platinum flipped back to a net long while copper length was reduced ahead of upside break.
4olh_cot4
Grains: The corn net short at 206k was the highest since June 2020 and biggest ever short held in late November. Overall, the sector saw broad selling with BCOM grains index suffering a 2.4% loss in the week.
4olh_cot5
In softs, the coffee net long was unchanged ahead of a tight supply-led surge while the sugar net long slumped to a three-month low. In livestock, the cattle long fell to a 13 month low while the hog position flipped back to a net short.
4olh_cot6
In forex we saw continued dollar selling with the gross long vs eight IMM futures and DXY cut in half to $3.8bn, down 2/3 in just two weeks. Led by demand for EUR ($1.9bn eq), GBP ($1.4bn) & AUD ($0.4bn). To partly offset there were small selling of JPY, CHF and NZD
4olh_cot7
In bonds, the bull steepener that followed dovish comments by Fed Governor Waller saw leveraged fund funds cover short positions across the curve, most aggressively at the front in 2’s and 5’s, while the SOFR net long reached a fresh record high. Overall, the DV01 (value of 1 bp move) was cut by just $21 million to -$429 million, with the corresponding long position being held by asset managers and other reportables

Previous "Commitment of Traders" articles

Commodity articles:

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
    Read full article
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

    Read full article
  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
    Read full article
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
    Read full article
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
    Read full article
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
    Read full article
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
    Read full article
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
    Read full article
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
    Read full article

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)

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

Contact Saxo

Select region

International
International
Products & pricing
Platforms
Accounts & service
General
Other
Legal

Trade responsibly
All trading carries risk. Read more. 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.