COT Report: Managed money's year-end positioning in forex and commodities

COT Report: Managed money's year-end positioning in forex and commodities

Ole Hansen

Head of Commodity Strategy

Key points:

  • Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week to last Tuesday, 31 December 2024.
  • Speculators ended 2024 holding the biggest dollar against eight IMM forex futures since April and prior to that since mid-2019
  • The commodities sector saw strong end of year demand for energy, led by crude oil, and grains led by corn
  • Both investment and industrial metals, saw net selling, courtesy of the stronger dollar and end of year profit taking

Forex:

In forex, speculators ended the year holding a USD 32.3 billion net long USD position versus eight IMM futures contracts and the DXY. Apart from a brief peak last April, this was the biggest bet on a stronger dollar since mid-2019. This helps explain the sudden burst of dollar selling on Monday following a report from the Washington Post that, according to sources, Trump may not seek broad-based tariffs, preferring to target key imports instead. Trump specifically denied the rumors, though this only partially defused the USD weakness as flows became less one-sided in favor of the dollar, as seen during the past couple of months. Besides small net longs in GBP and MXN, all other currencies were traded from the short side, led by CAD (-$12.3bn equivalent), EUR (-$9bn), CHF (-$4.6bn), and AUD (-$4.4bn).

The net non-commercial dollar position versus eight IMM futures in week to 31 December
Non-commercial IMM futures positions versus the dollar in week to 31 December

Commodities:

Speculators exhibited a relatively buoyant mood ahead of year-end according to data covering managed money activity in the week to 31 December. While activity ground to a halt, the Bloomberg Commodity Index nevertheless managed to rise 0.6% despite continued headwinds from a stronger dollar, which rose by the same amount. Demand, however, was focused primarily on the energy sector, which rose 2.2%, and the grains, which gained 2.7%. At the other end of the scale, the metal sector, both investment and industrial metals, saw net selling, weighed down by end-of-year profit-taking courtesy of the stronger dollar and early 2025 demand concerns sending copper lower to challenge key support. On an individual level, the buying was concentrated in WTI and Brent crude oil, the two distillate (diesel) contracts, natural gas, and the three major grains contracts, while sellers focused on platinum, copper, sugar, and hogs.

Managed money commodities long, short and net positions, as well as changes in the week to 31 December
Energy: Crude oil buying lifted the combined net long in WTI and Brent to a five-month high at 347k contracts, driven by a combination of fresh longs and reduced shorts. Elsewhere, the two diesel contracts also saw demand, while surging natural gas prices drove a 10% increase to near a three-year high.
Metals: Gold saw light profit-taking ahead of year-end, while silver net selling picked up. Both the platinum and copper positions flipped back to net short, in copper for the first time since March, partly explaining the early January bounce from key support in the USD 4 area
Grains: Speculators rushed into corn as it reached a six-month high, resulting in a 42% jump in the net long to a 22-month high at 229k contracts, while short covering supported soybeans and wheat.
Softs and livestock: Softs were mixed with profit-taking seen in sugar and coffee, while the cotton net short continued to rise. In livestock, the cattle net long remained elevated.

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:

22 Nov 2024: Commodity weekly: Strongest performance since April
19 Nov 2024: 
Gold and silver rise on Russia-US tensions
18 Nov 2024: 
COT: Limited dollar demand despite strength; Acclerated metals selling 
11 Nov 2024: 
COT: Speculators bought energy and grains, sold gold ahead of elections
8 Nov 2024: 
Commodity weekly: Mixed response to Trump 2.0
6 Nov 2024: 
Podcast: US election and the market reactions, including commodities
6 Nov 2024: 
Trump and Republican victories spark commodity decline
4 Nov 2024: 
COT: Speculators flock to dollars, exit commodities ahead of US election
1 Nov 2024: 
Commodity weekly: Some weakness seen ahead of critical week
31 Oct 2024: 
Crude prices seek stability ahead of key support and US elections
30 Oct 2024: 
Will the US election result spark a gold correction?
29 Oct 2024: 
Podcast: Electrification's surge impact on commodities and equities
28 Oct 2024: 
COT: Crude length cut; silver and platinum see strong demand
25 Oct 2024: 
Commodity weekly: Market jitters on the rise ahead of U.S. elections
23 Oct 2024: 
Crude prices stalled by two-sided market risks
22 Oct 2024: 
Gold and silver's remarkable run in four charts
22 Oct 2024: 
Podcast: The Trump trade enters the metal market
21 Oct 2024: 
COT: Dollar shorts squeezed; Shift in commodity exposure from energy to metals
18 Oct 2024: 
Commodity weekly: Gold's record-breaking run continues
17 Oct 2024: 
Copper prices decline amid doubts about China stimulus impact
16 Oct 2024: 
How high can gold and silver rally?
8 Oct 2024: 
Podcast: Navigating market shifts: Fed rate cuts, commodities and rising food prices
8 Oct 2024: 
Video: These commodities might be impacted by the US election
7 Oct 2024: 
Crude oil surge caps strong four-week rally for commodities
7 Oct 2024: 
COT: Broad buying momentum persists, led by Brent, copper and grains
2 Oct 2024: 
Q3 2024 Commodity Outlook: Gold and silver continue to shine bright


Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
Disclaimer

The Saxo 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 is not intended to and does not change or expand on this. 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 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 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 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 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 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-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.