COT: WTI crude long plunges to seven-year low

Metals

Gold and silver traders have spent the past few weeks scrambling to rebuild positions that was sharply reduced during the February correction, when Fed Chair Powell’s comment about combating inflation at whatever cost drove expectations for a sharply higher terminal fed funds rate. The SVB collapse changed that completely and the subsequent collapse in yields and expectations the next move in rates will be a cut helped propel precious metals sharply higher, thereby supporting fresh buying from hedge funds in futures and investors in ETF’s. 

While total holdings in ETFs have seen their first back-to-back weekly increase in more than a year, hedge funds have in just two weeks reversed most of the selling that occurred during the previous four. Compared with the last time gold traded at $2000 last year in March, the 107k lots net long is 40% below the length held back then, highlighting the prospect for more buying should the technical and fundamental outlook continue to support. For now, however, it is worth noting that the bulk of the buying in the latest reporting week to March 21 was primarily driven by short covering as speculators had second thoughts about adding length above $2000. Potentially driven by the wide margin between the market's belief in rate cuts and the no-change stance being signaled by the Fed. 

The silver net only managed a return to neutral with 20k lots of buying in the past two weeks, being less than half the 43k lots sold during the previous five. The China recovery focus at the start of the year saw the HG copper net long reach an 11-month high on January 24 at 41k lots before collapsing to a 7k short in the latest reporting week. Just like the price correction has failed to deal a blow to the overall bullish outlook for copper it is worth noting that the reduction seen during the past couple months has primarily been driven by long liquidation (-41k lots) while the appetite for short selling (+7k) has been relatively muted. 

Agriculture

With so much going on in metals and energy we will give the agriculture sector a bigger focus in next week’s update. We do note, however, that the 75k lots of net selling during the lates reporting week reduced the combined exposure to 339k lots, lowest since August 2020 and down 74% from the post-Ukraine invasion peak. The reductions last week were driven by the soybean complex, cotton and livestock while wheat and corn were bought, the latter after funds in the previous four weeks sold a record 289k lots, thereby flipping the position to a net short for the first time since August 2020. 

Forex

In forex the main theme was an overriding level uncertainty regarding the short-term direction of the dollar and other major currencies as the banking crisis continued to unfold. The result being a very mixed performances which overall left the Dollar index small down on the week. Overall, the gross dollar short against nine IMM currency futures was cut by 19% to $3.8 billion, a four-month low. Buying of EUR, JPY and CHF being offset by selling of others, not least the biggest week of CAD selling since late 2018 lifting the net short to a four-year high at 57k lots. 

However, looking underneath the bonnet we find a market where speculators mostly focused on reducing their overall exposure with selling of both longs ($6 billion equivalent) and shorts ($5.1 billion) resulting in the mentioned reduction in the overall dollar short.