Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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COT: Iran tensions lift gold and oil longs
Ole Hansen
Head of Commodity Strategy
Summary: The COT report covering the week to January 7 found speculators turning more selective. This following weeks of broad-based buying which lifted the combined net long across 24 major commodity futures to an 18-month high. Continued buying of crude oil and gold left both contracts
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.
Strong and broad-based speculative buying ahead of yearend turned more selective during the first week of the year. The combined net-long across 24 major commodity futures was left unchanged close to an 18-month high. While buying of crude oil, gold, platinum and soybeans continued speculators sold most other contracts. Most noticeable natural gas which hit a record short as the price hit a record seasonal low. HG Copper was knocked back to neutral as the US-China deal rally ran out of steam.
Crude oil was left vulnerable to profit taking following the US-Iran pump and subsequent dump when the focus turned to de-escalation. The combined net-long in Brent (+15k) and WTI (+5k) reached 714k lots, a 15-month high, following the US killing of a top Iranian general. The near 50% increase in net-longs following the December 6 OPEC+ decision to lower production left many recently established longs under water as the price dropped 11% from its Wednesday peak.
Hedge funds increasing bullish gold (+9k) bets to the highest since September got handsomely rewarded when the metal briefly spiked above $1600/oz last Wednesday. The subsequent $70 correction briefly challenged the bullish sentiment before the risk of another geopolitical flareup and a weaker than expected US job report ensured a weekly close above $1555/oz, the September high.
Platinum reached a fresh record long at 49k lots despite being rejected at $1000/oz, the September high, a failure which subsequent left it exposed to profit taking. Copper was knocked back to neutral as the US-China deal rally ran out of steam. The metal has traded in an uptrend since October with tight supply and lack of supply growth providing the underlying support.
In softs both sugar and coffee was sold with the latter retracing 50% of the October to December price surge as exchange-monitored warehouse supplies jumped.
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.
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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