Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access both platforms from your single Saxo account.
COT: Gold bulls stand firm despite recent correction
Ole Hansen
Head of Commodity Strategy
Key points:
- Commitment of Traders report highlighting futures positions and changes made by speculators across forex and commodities during the week to 23 April
- The USD long extends to a fresh five-year high, despite some emerging price weakness
- Gold bulls bought into last week's weakness, protecting an elevated long established at much lower levels
- A heavily shorted grains sector sees the strongest week of net buying since last July
COT on forex
In the forex market, aggressive dollar buying extended to a sixth week, despite some emerging weakness, especially against the euro and the activity currencies of CAD, AUD and NZD. Overall, the gross dollar long against eight IMM futures and the dollar index jumped by 28% to USD 32.9 billion, a near five-year high. The move was led by the euro where traders flipped their position to a -10k net short for the first time since September 2022, the yen net short reached an 18-year high at -180k while the 26k net short in Sterling was the biggest since September 2022.
COT on Commodities
In the week to 23 April, the Bloomberg Commodity Total Return index traded near flat for a second week with strong gains in industrial metals, livestock, and not least grains offsetting losses in energy, precious metals and softs. On an individual level the gainers among the 26 futures market tracked in this were natural gas, copper, wheat, cocoa and hogs while sellers focused on fuel products, gold, silver, platinum and coffee.
Two major developments stood out in this report, namely strong buying of a heavily shorted grains sector, led by surging wheat on spring weather worries in southern Russia, parts of the US plains and Western Europe, and not least the surprisingly small reaction to the near 3% gold correction.
Two failed attempts to gain a foothold above USD 2400 in the prior week helped drive an overdue gold correction, but as the data shows, the near 3% correction in fact triggered a small amount of net buying, not selling, and it highlights the strength of the rally with the bulk of the length (91.5k contracts or 285 tons) having been bought in early March below USD 2200. In other words, a much deeper correction potentially below USD 2250 is needed to trigger accelerated long liquidation.
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.
Commodity articles:
26 April 2024: Commodity weekly: Sticky inflation and adverse weather focus
23 April 2024: What drives the gold and silver correction ?
19 April 2024: Commodity weekly focus on copper, gold, crude and diesel
17 April 2024: Copper rally extends to near two year high
16 April 2024: Crude oil's risk premium ebbs and flows
12 April 2024: Gold and silver surge at odds with other market developments
10 April 2024: Record breaking gold highlights silver and platinum's potential
5 April 2024: Commodity market sees broad gains, enjoying best week in nine months
4 April 2024: What's next as gold reaches USD 2,300
3 April 2024: Q2 Outlook: Is the correction over?
3 April 2024: Cocoa: A 50% farmgate price boost a step in the right direction
27 Mar 2024: Crude oil maintains support amidst array of bullish signals
26 Mch 2024: Gold's behaviour points to sustained demand
20 Mch 2024: Attacks on Russian refineries lift risk premium and crude prices
19 Mch 2024: How to add copper exposure to your portfolio
15 Mch 2024: Commodity weekly: Green shoots seen across key sectors
13 Mch 2024: Lack of catalyst pushes crude into tightening range
8 Mch 2024: Commodity weekly: Gold and silver steal the limelight
8 Mch 2024: Investing with options - Gold optionality
6 Mch 2024: How to add gold exposure to your portfolio
6 Mch 2024: Video: What happened to the gold prices?
1 Mch 2024: Grains dip, cocoa soars, gold and oil see rays of strength: February’s commodity mix
Previous "Commitment of Traders" articles
22 April 2024: COT: Declining momentum may signal shift toward consolidation
15 April 2024: COT: Hedge funds propel multiple commodities positions beyond one-year highs
8 April 2024: COT: Speculative interest in metals and energy gain momentum
2 Apr 2024: COT: Gold and crude longs maintained amid strong underlying support
25 Mch 2024: COT: Hedge funds zoom in on crude, copper and silver
18 Mch 2024: COT: Hedge funds buying expands from precious metals to copper and grains
11 Mch 2024: COT: Specs rush back into gold, elevated yen short in focus
4 Mch 2024: COT: Underinvested speculators fuel gold's latest surge
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