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Buying gold jumped ahead of CPI Shocker

Saxo Bank publishes weekly Commitment of Traders Reports (COT), which cover leveraged fund positions in commodities, bonds and equity index futures. For IMM currency futures and the VIX, we use the broader metric called non-commercial.

The week spanned the run-up to last Wednesday’s CPI shocker, which contributed to real yields falling and both gold and the dollar to rise sharply. In the run-up to the data, we had seen real yields on ten-year US maturities fall by almost 0.25% as the market drove up inflation expectations.

Elsewhere, it was a week with general risk  -petite supporting higher stocks while the dollar fell. In commodities, overall exposure to 24 major commodity futures remained stable, with net sales of energy, grains and softs being offset by demand for precious metals, not least gold, and livestock.

energy

Speculators became small net buyers of crude oil for the first time in five weeks, with WTI purchases compensating for another week with Brent sales. The latter has now posted net sales for the past five weeks, causing the net to hit an annual low of 24,000 lots, or 240 million barrels. In addition, gasoline and distillates were sold together with natural gas.

Crude Oil Update From Today’s Market Quick Take:

Crude Oil (OILUKJAN22 & OILUSDEC21) has managed to rebound again, with Brent finding support ahead of USD 80 and its 50-day moving average. Higher gas prices (TTFMZ1) in Europe after Russia’s Gazprom failed to book additional pipeline c -acity via Poland and Ukraine for December also supported the market as this increased the prospect of consumers switching to criminally expensive gas-oil-based fuels. Aside from the risk of US action potentially triggering a downward reaction, the market will also be on the lookout for the IEA’s monthly oil market report on Tuesday and the EIA’s weekly equity report on Wednesday.

Speculators plunged into gold futures as real yields fell and the dollar fell ahead of hot CPI pressures last Wednesday. In other words, the 48% jump in net long to a 10-month high of 146,000 lots came before the price broke key resistance at $ 1,835 last Wednesday.

The subsequent rally to current levels around $ 1870 has undoubtedly added more length and as the dollar continues to strengthen and yields show signs of  -preciation the metal will soon have to break up to break sales from recently established ones Avoid long positions. Despite a 3.5% rally during the week, silver buying was subdued, with net longs only climbing 15% to hit a two-week high of 27.5k lots.

Despite the uptrend for the week, the net length of range-bound copper was cut 31% to a seven-week low of 24,3,000 lots just waiting for the technical outlook to improve.

Agriculture

The strong buying in the grain sector in recent weeks has been reversed, with soybean sales being the main driver. The soybean complex was sold ahead of last week’s WASDE report, which was ultimately supported after the U.S. Department of Agriculture cut its production estimate. Overall, total grain and soybean long-term was reduced by 8%, with only minor changes observed in wheat and corn. The softs sector was mixed with a 7% reduction in coffee length before the recent price jump to a nine-year high. The largest decline was in cocoa, where 20,000 lots turned the position back into a net short.

Coffee update from today’s Market Quick Take:

Arabica coffee (KCH2) hit a nine-year high at $ 2.2825 a pound on Monday, with supply outlook tightening. After an annus horribilis in Brazil, where frost and drought hit not only the latest harvest, but possibly also the 2022 season and usually larger harvests, the market also has to face a lack of supplies, rising fertilizer prices, too much rain in Colombia and, more recently, too Danger of civil war in Ethiopia, the third largest grower of the arabica bean worldwide. The break above $ 2.25, the 2014 high, could signal a market headed towards $ 3, a record high last seen in 2011.

Forex

It turned out that speculators were selling dollars for a fifth week before the CPI was released last week. The net long position on ten IMM currency futures and the dollar index was reduced 4% to $ 21.9 billion, a six-week low.

Strong GBP sales are offset by EUR, AUD, CHF and JPY purchases.

What is the Dealer Obligations Report?

The COT reports are issued by the US Commodity Futures Trading Commission (CFTC) and ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the US closes with data from the week that ended the previous Tuesday. They divide the open interest in futures markets into different user groups depending on the asset class.

  • raw materials: Producer / Dealer / Processor / User, Sw – Dealer, Managed Money, and others
  • Finances: Dealers / intermediaries; Asset managers / institutional; Leveraged Funds and Others
    Forex: A rough breakdown between commercial and non-
  • commercial (speculators)

The reasons why we mainly focus on the behavior of the highlighted groups are:

  • You probably have tight stops and no underlying exposure that is secured
  • She does that most reactive to change in the case of fundamental or technical price developments
  • It offers views over Main trends but also helps to decipher when a reversal threatens

Ole Hansen, Head of Commodities Strategy at Saxo Bank.

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This article is provided by Saxo C -ital Markets (Australia) Pty. Ltd, Part of Saxo Bank Group via RSS feeds on FX Empire

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