Log in Open account
Singapore
COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record

COT: Broad commodity selling led by crude and gold; T-bond short hit fresh record

Commodities
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, forex and bonds during the week to Tuesday, August 22. A week that saw risk adversity continue, driven by global growth concerns and a relentless rise in government bond yields. Elsewhere the dollar remained bid, forcing additional short covering from speculators while an unchanged commodity sector did little to prevent continued long liquidation, led by crude oil and gold.

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 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.

Global Market Quick Take Europe
Saxo Market Call Daily Podcast

 
This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, August 22. A week that saw risk adversity continue, driven by global growth concerns and a relentless rise in government bond yields which saw the yield on US 10-year Notes reach a fresh 16-year ahead of Friday’s Jackson Hole remarks from Jerome Powell, the Fed Chair. Elsewhere the dollar remained bid, forcing additional short covering from speculators while the commodity sector was mixed.

Commodity sector:


The Bloomberg Commodity index traded flat on the week with gains in metals and grains offsetting losses in energy and soft commodities. The leverage fund community, which includes hedge funds and CTA’s reacted to these mixed signals by cutting their overall net exposure by 134,000 contracts to 917,000 contracts, representing an $8 billion reduction in the nominal exposure to $73 billion. The 134k reduction was the result of 36k long liquidation and 98k contracts of fresh short selling. 

The biggest reductions were seen in crude oil, gold, corn, wheat, as well as coffee and cotton.

Crude oil and fuel products: Crude oil selling accelerated with the combined long being reduced by 30k to 380k, a five-week low, and split half and half between long liquidation and fresh short selling. The ULSD (diesel) long reached a November 2021 high while the natural gas long was cut 42%
Gold, silver and copper: A fifth week of gold selling cut the net long to a five-month low, while the gross short jumped to near a nine-month high, raising the risk of short covering. Silver flipped back to a net long as the price surged while the copper short was reduced by 17%.
In grains, the main change was the 46% increase in the corn short to an elevated 106k contracts as well as continued selling of wheat, resulting in the KCB RHW contract also flipping to a net short. Muted soybeans buying despite a 3% hot weather driven price spike.
Softs & Livestock: Broad selling of softs led by a 28% increase in coffee short and 19% reduction in cotton long.
In forex continued dollar strength saw speculators cut their dollar short vs eight IMM futures and the DXY by 12% to a six-week low at $13.8 billion. Biggest changes were buying of GBP ($0.6bn eq.) and selling of JPY ($1.2bn) and AUD ($0.7bn).
US bond futures: Leveraged fund selling of the major bond futures continued with the buyer being asset managers taking advantage of rising yields. The combined net short in the T-bond and T-bond Ultra futures reached a fresh record high at 1.1 million lots, representing a basis point value (DV01) of $194 million.

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.