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 Tuesday, August 29. A week that included the markets' initial, and very positive risk-on response to data pointing to a softening US job market as well as declining consumer confidence. The ‘bad news is good’ reaction was driven by market speculation the Federal Reserve was getting closer to cease its aggressive tightening campaign. Commodities rose strongly with gains seen across all sectors led by precious metals.
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:
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, August 29. A week that included the markets' initial, and very positive risk-on response to data pointing to a softening US job market as well as declining consumer confidence. The ‘bad news is good’ reaction was driven by market speculation the Federal Reserve was getting closer to cease its aggressive tightening campaign. Global and US stock indexes climbed by more than 2%, US bond yields slumped, especially at the front end of the curve, while the dollar traded a tad softer. Commodities rose strongly with gains seen across all sectors led by precious metals.
The Bloomberg Commodity index rose nearly 2% on the week as the market responded to China’s efforts to support its property sector, stock market and currency, and not least the prospect of a US peak rate being brought forward. Both developments supporting the metal sector, both industrial and precious. The energy sector continued its week-long advance with prolonged production cuts from Saudi Arabia and its allies continuing to tighten a market that has yet to witness a slowdown in demand. Finally, the agriculture sector, except for wheat, all traded higher led by soybeans, and not least the softs sector where sugar added 8.8% and cocoa 4.8%.
Hedge funds and CTAs responded to these developments by increasing their overall net long across 24 major commodity futures by 18% to 1.08 million contracts, with demand being led by WTI crude oil, gold, silver, platinum and soybeans, while selling was concentrated in a few contracts, led by Brent, natural gas and wheat.
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
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/en-gb/legal/disclaimer/saxo-disclaimer)