Log in Open account
Singapore
COT: Commodities see broad demand from speculators as the USD slumps to a net short COT: Commodities see broad demand from speculators as the USD slumps to a net short COT: Commodities see broad demand from speculators as the USD slumps to a net short

COT: Commodities see broad demand from speculators as the USD slumps to a net short

Commodities
Ole Hansen

Head of Commodity Strategy

Key points:

  • Positions and changes made by speculators in commodities and forex in the week to August 27
  • Dollar position flips to a net short following biggest week of selling since March 2020
  • Broad commodity buying supported by softer dollar, Libya disruption and weather worries
  • Buyers focusing mainly on Brent, silver, copper, soybeans and sugar

Forex:

In the week to 27 August, continued dollar weakness helped trigger the biggest week of dollar selling since March 2020. The net sales of USD 13 billion versus eight IMM currency futures flipped the net USD position to a net short of USD 8 billion, the biggest since January. All currencies except the MXN saw net buying, and apart from notable buying of GBP and AUD, the change was led by the euro, where trades increased their net long by 66% ahead of the failed attempt to mount a challenge at EUR 1.12. Elsewhere, CAD saw a massive amount of short covering, but overall it remained the most shorted currency against the dollar. Buying of JPY continued, albeit at a much-reduced pace, with the net long reaching a fresh 3½-year high.

Non-commercial IMM futures positions versus the dollar in week to August 27
The aggregate dollar position flipping to a net short for the first time since January

Commodities:

Large speculators, such as hedge funds and CTAs, turned broad buyers of commodities in the week to 27 August, overall supporting a 1% increase in the Bloomberg Commodity Index, which tracks a basket of 24 major commodity futures, all of which are tracked in this update. Excluding natural gas, which slumped by 10.5%, the index traded up 1.7%, with 22 out of 26 futures seeing net buying.

While the softer dollar provided a generally commodity-friendly backdrop, we saw several developments support the individual sectors and commodities. The energy sector received a boost—short-term as it turned out—from Libya’s supply disruption, while weather developments, especially in the US and Brazil helped support key food commodities from grains to sugar, cocoa, and coffee. Elsewhere, gold had a quiet week, trading near a record high after Jerome Powell, the Fed chair, confirmed a US rate cut was on the agenda at this month’s FOMC meeting. Silver, meanwhile, enjoyed the tailwind from a recovering industrial metals sector, not least copper, before running into firm resistance above USD 30.

Overall, these developments saw hedge funds being net buyers of all sectors, led by grains and softs, while on an individual basis, demand was strongest for crude oil, especially Brent, silver, copper, soybeans, and sugar.

Managed money long, short and net commodities positions in the week to August 27
Energy: Fresh longs helped lift the Brent net long by 31% to 81k, while demand for WTI was relatively muted. Overall, the combined net long at 267k remains near the bottom of the long-term range due to relatively weak price action, as traders remain sceptical about crude’s upside potential amid OPEC+ production increases and China’s demand softness. The nat gas long more than halved as prices tanked by 10%.
Metals: Gold had a very quiet week, with near-record price levels not attracting any profit-taking from funds holding an elevated net long. Silver length increased by 10%, while recent short sellers continued to get squeezed in copper, driving up the net long by 35% to 19k contracts.
Grains: Despite a fresh round of short covering, the grains net short remains near record levels amid the prospect of a bumper crop being added on top of leftovers from last year’s bumper harvest. In nominal terms, the soybean short is valued at USD 9 billion, followed by corn at USD 5 billion.
Softs: Fires across Brazilian sugar cane fields helped drive a near 12% price surge, forcing speculators to abandon recently established short positions. Overall, the net flipped back to a long following the most aggressive buying spree since January last year. Cocoa and coffee rallies attracted a small increase in net longs, while cotton short covering reduced the net short to a five-week low

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:

30 Aug 2024: Commodities sector eyes fourth weekly gain amid softer dollar and Fed expectations
27 Aug 2024: Month-long sugar slide pauses amid concerns of Brazil's supply
27 Aug 2024: Libya supply disruptions propel crude prices higher
26 Aug 2024: COT: Funds boost metals investment as dollar long positions halve amid weakness
23 Aug 2024: Commodities Weekly: Metal strength counterbalancing energy and grains
22 Aug 2024: Persistent supply contraints keep cocoa prices elevated
21 Aug 2024: Weak demand focus steers crude towards key support
19 Aug 2024: Resilient gold bulls drive price to fresh record above USD 2500
19 Aug 2024: COT Buyers return to crude as gold stays strong; Historic yen buying
16 Aug 2024: Commodities weekly: Gold strong as China weakness drags on other markets
9 Aug 2024: Commodities weekly: Calm returns to markets, including raw materials
8 Aug 2024: Sentiment-driven crude sell-off eases, allowing traders to focus on supply risks
7 Aug 2024: Limited short-selling interest observed during copper's recent aggressive correction
6 Aug 2024: Video: What factors are fueling the current market turmoil and gold's response
5 Aug 2024: COT: Broad commodities sell-off gains momentum; Forex traders seek JPY and CHF
5 Aug 2024: Commodities: Position reduction in focus as volatility spikes
2 Aug 2024: Widespread commodities decline in July, with gold as the notable exception

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article

  • 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.

    Read article

  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article

  • 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.

    Read article

  • 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.

    Read article

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 Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, 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.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/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 Markets 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 Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore
Products & pricing
Asset Management
Platforms
Accounts & service
General
Other
Legal

Losses can exceed deposits on margin products. Please ensure you understand the risks.

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

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 such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

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

The information or the products and services referred to on this website 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 intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.