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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
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COT: Record gold buying pace continued ahead of FOMC
Ole Hansen
Head of Commodity Strategy
Summary: Hedge funds increased bullish bets across 24 major commodity futures by 44% during the week to June 18, the day before the FOMC meeting.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
To download your copy of the Commitment of Traders: Commodity report for the week ending June 18, click here.
Gains were led by WTI crude oil, gold, soybeans, corn, wheat and sugar. At the other end, natural gas and Brent crude oil saw most of the selling.
To download your copy of the Commitment of Traders: Commodity report for the week ending June 18, click here.
Gains were led by WTI crude oil, gold, soybeans, corn, wheat and sugar. At the other end, natural gas and Brent crude oil saw most of the selling.
Crude oil was mixed, with a small combined reduction in the net-long being the result buyers returning to WTI for the first time in eight weeks while selling of Brent extended into a sixth. Since April 26 the combined long has been cut by 41% or close to 300k lots hence the bullish reaction to the post FOMC dollar weakness, the biggest drop in US oil stocks in six weeks and not least worries that tanker and drone attacks in the Mideast could escalate to something more dramatic.
Natural gas remained under attack from short-sellers as the price slid to a 1995 seasonal low on rising US stockpiles. Rising shale output has swamped a market where a sustained period of summer heat is now needed to boost demand from utilities and bring about short-covering.
Strong buying of gold continued ahead of the post-FOMC surge to $1,400/oz. Funds increased the net-long by 21% to 190k lots, a 16-month high. During the past three weeks a record 157k lots has been bought and with this in mind the short-term focus turns to gold’s ability to hold onto these gains and reassure new longs that they have not bought another high but instead a potential new low. With that in mind the 2016 high at $1,375/oz and 2018 high at $1,366/oz are now the key technical levels that need to hold in order to avoid profit taking.
Copper’s bounce from key support at $2.6/lb supported a 15% reduction of the record short while renewed widening of platinum’s record discount to gold, approaching 600 dollars, helped drive a 36% increase in the net-short to 21k lots a 40-week low.
Strong buying of grains extended into a fifth week led by soybeans (net-short cut to 12-week low) and corn (net-long at 1-year high) as ongoing weather worries could further reduce the 2019 crop outlook. Primarily due to the continued short position in soybeans the combined long of the three major crops only reached 90k lots, less than one-quarter of the most recent seasonal peak from 2015.
Soft commodities were mixed with short-covering halving the sugar net-short to a 7-week low. The cocoa net-long reached a one-year high before profit taking emerged to challenge the uptrend.
What is the Commitments of Traders report?
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
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.
What is the Commitments of Traders report?
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
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.
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