Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Summary: The latest COT report for the week ending September 25 reveals a strong uptick in bullish sentiment on the part of leveraged funds. Demand was focussed on energy but buying was noted across most sectors.
The Brent crude oil rally to a new four-year high above $80.50/b attracted continued buying with the net-long rising 28,465 lots to 496,343 lots, an 18-week high but still well below the April record at 632,000 lots. The long-short ratio, meanwhile, jumped to a stretched 19.3 (longs per one short) on a combination of longs being added and the gross-short falling to a seven-year low. WTI, meanwhile, was sold for a third consecutive week.
Gold’s range bound behaviour around $1,200/oz attracted limited interest while silver shorts were covered as it began recovering from a multi-year low against gold. Platinum and copper both saw strong buying as industrial metals found a bid after China announced tax cuts and increased (infrastructure) spending.
Grains were bought on speculation that a worst case scenario may have been priced in by now. On Friday, however, the release of quarterly US stocks confirmed a continued challenging environment with soybeans and corn stocks both being higher than expected.
The sugar net-short jumped 62% after the early September recovery was completely reversed on bearish supply news out of India. Arabica coffee’s record short was cut by 3% in response to a recovering Brazilian real. On Friday the December contract closed at $1.0245/lb and above its 20-day moving average for the first time in more than three months.