COT Report: Crude, Gold and Grains See Mild Profit Taking

Commodities:

Six weeks into 2025, the commodities sector remains strong, with the Bloomberg Commodity Total Return Index trading at a 25-month high and showing a year-to-date gain of 7.7%, outperforming both the S&P 500 and the MSCI World Index by a decent margin. What is particularly notable so far is the broad nature of the rally, with all sectors showing gains, led by softs and precious metals. The top five BCOM members are Arabica coffee (+29.5%), US natural gas (+16.7%), HG copper (+14.7%), silver (+13.4%), and gold (+10.4%).

Part of the strong performance in the mentioned metals market, which are all based on New York futures prices, is due to recent squeezes amid fears over the impact of US import tariffs on key metals, which also include platinum. Last Friday, for example, the High Grade futures in New York surged to a nine-month high of 483 cents per pound, reflecting a 47-cent premium per pound or USD 1000 per ton over the corresponding price on the London Metal Exchange. Considering this spread in ‘normal’ times trades below 10 cents, it highlights upward pressure on prices in New York, which, for growth- and demand-dependent metals like copper and platinum, may not reflect their underlying fundamentals, which remains relatively soft for now.

Responding to the mentioned broad price strength, managed money accounts, which include hedge funds and CTAs, turned very strong buyers during December and January, driving up the net long across 27 major futures contracts to levels last seen in June 2022, near the end of the pandemic- and stimulus-led rally that saw the BCOM index more than double. However, in the last couple of weeks, some mild profit-taking has started to emerge, primarily driven by selling of crude oil, gold, soybeans, and corn, and only partly offset by renewed demand for natural gas, copper, and wheat.

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.

Recent commodity articles:

5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
31 Jan 2025: Commodities weekly: Strong January led by precious metals
29 Jan 2025: Agriculture sector rally led by coffee, corn and cattle
27 Jan 2025: COT Report: Commodity buying extends to fourth week
24 Jan 2025: Commodities weekly: Trump tariff threats and energy agenda in focus
23 Jan 2025: Crude oil weakens amid tariff uncertainty
22 Jan 2025: Gold and silver see fresh gains as Trump 2.0 era begins
20 Jan 2025: COT Report: Elevated commodities longs face short-term risks
17 Jan 2025: Commodities weekly: Strong January rally pauses ahead of Trump
15 Jan 2025: Q1 2025 Commodity outlook: A bumpy road ahead calls for diversification
14 Jan 2025: COT Report: Hedge fund long jumps to 17-month high led by crude, gas and metals
13 Jan 2025: Crude oil rally amid winter demand and Russian sanctions
10 Jan 2025: Commodities weekly: Strong start to the year led by energy and metals
7 Jan 2025: COT Report: Managed money's year-end positioning in forex and commodities
20 Dec 2024: Silver's resurgence in 2024: A precious metal with an industrial edge
17 Dec 2024: Investors cash in: Gold and silver see year-end profit taking
17 Dec 2024: Podcast: A wild ride in 2025 awaits
16 Dec 2024: COT Report: Agriculture in demand; Traders lift bets against the euro
13 Dec 2024: Commodities weekly: The forward curve and impact on returns
10 Dec 2024: Brazil's coffee crisis pushes Arabica to all-time high
9 Dec 2024: COT Report: Speculators bought crude and gold: euro shorts reach 4-year peak
6 Dec 2024: Commodities weekly: Copper rises on China optimism; OPEC delay signals crude weakness
3 Dec 2024: COT: Mixed week in commodities as dollar buying continued

Podcasts that include commodities focus:

18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated? 
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins