Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
You can access both of our platforms from a single Saxo account.
COT: Speculators wrongfooted by grains surge
Ole Hansen
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 and forex during the week to Tuesday, June 13. A week that saw US bond yields rise ahead of the FOMC meeting, while in in forex, another week of fresh dollar weakness did not prevent a continued reduction in bearish dollar bets to a three-month. In commodities, broad gains supported a 20% jump in bullish bets, primarily driven by short covering across grains and industrial metals
Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.
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 reasons why we focus primarily on the behavior of the highlighted groups 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
Global Market Quick Take Europe
Saxo Market Call Daily Podcast
Commodity Weekly: Best month in over a year
This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to last Tuesday, June 13. A week that saw continued strong gains across global stock markets and US bond yields rising ahead of last week’s FOMC meeting. In forex, another week of fresh dollar weakness did not prevent a continued reduction in bearish dollar bets to a three-month low while broad commodity gains supported a 20% jump in bullish commodity bets, primarily driven by rising demand for grains and industrial metal market.
Commodity sector:
Money managers which include leveraged traders such as hedge funds and trend-following CTA’s remain key actors across the commodity market, and on a weekly basis the US CFTC (Commodity Futures Trading Commission) through its Commitment of Traders Report give insight to the positioning among this group of traders. Instead of causing them, 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.
In the week to June 13, the Bloomberg Commodity Index climbed 0.7% as May weakness continued to be replaced by June strength driven by a softer dollar, speculation that the Chinese government may step up its support for the economy, hot and dry weather raising concerns across the agriculture sector and Saudi Arabia’s latest attempt to prop up the oil market. Gains were primarily focusing on the grains (+2.4%) and industrial metal sector (2.1%) while precious metals (-0.8%) and energy (-0.9%) traded softer.
Speculators, responding to these latest developments by lifting their combined net long across 24 major commodity futures by 153k contracts, or 20% to 928k contracts. Primarily driven by short covering in the grains market and copper and fresh longs being added to the softs sector. Energy was mixed with crude oil selling being offset by demand for gasoil and natural gas while precious metals, led by gold, saw net selling ahead of the FOMC meeting.
Latest Market Insights
Quarterly Outlook 2024 Q3
Sandcastle economics
-
-
Bonds: What to do until inflation stabilises
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.
-
Equities: Are we blowing bubbles again
Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.
-
FX: Risk-on currencies to surge against havens
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.
-
Commodities: Energy and grains in focus as metals pause
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.
-
The rise of populism: Far-right parties will influence the future
The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.
-
Investing in China: Navigating Q1 amid economic challenges
Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.
Disclaimer