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 yardstick called non-commercial.
This summary highlights futures positions and changes made by hedge funds in the commodities, forex and finance sectors as of last Tuesday, November 16th. A week in which the market responded to the U.S. inflation shock on November 11th by sending the dollar up 2% to a new high for the cycle while 10-year break-even yields jumped 20 basis points for a decade . While bond market volatility increased, stocks remained stable, with the VIX declining slightly. The commodities sector was mixed with gains in precious metals, not least grains and soft commodities, which helped offset the weakness in the energy sector as a whole.
Hedge funds increased their total commodity exposure, measured in lots, in 24 large futures contracts, the highest since July. Driven by persistently strong price movements throughout the agricultural sector and, more recently, by precious metals in response to rising inflation. In these sectors all but one markets were bought while the energy sector was mixed with continued sales of crude oil only partially offset by demand for gasoline and natural gas.
The four-week decline in Crude Oil resulted in its largest weekly decline since July, and this time, unlike in recent weeks, WTI led the decline with a 10% cut to 307,000, barring a deteriorating short-term technical outlook aside from the prospect on a US inventory release to curb domestic gasoline prices. Meanwhile, Brent experienced its net long slump to a one-year low of 221.5K lots at $ 86.75, now a double high.
Crude Oil (OILUKJAN22 & OILUSDEC21) opened weaker in Asia after Friday’s big decline but has so far found support at $ 77.85, the previous high from July. In recent weeks, the market focus has shifted from the current scarce supply to the risk of a coordinated release of reserves, fears of another Covid-related slowdown in demand, and recent oil market reports from the EIA and IEA that point to a balanced market in early 2022 Since its recent high has fallen by about 10%, it may have concluded that an SPR release is now largely priced in.
Another week of heavy gold buying has now set the alarm bells ringing amid the risk of long liquidation if the yellow metal fails to sustain its US CPI surge above $ 1,830. Last week the net long gold position hit a 14-month high of 166,000 lots and the rate of accumulation, especially the 70% jump in the past two weeks alone, will raise a red flag for tactical trading strategies that seek payday short support should give way.
gold extended the dip below $ 1850 overnight on Friday before rebounding from key support in the noted $ 1830-35 area. The risk of a faster withdrawal of the Fed incentives that are propping up real returns and the dollar has limited gold’s ability to build on the technical breakout for the time being. However, Friday’s weakness helped attract ETF buying as Bloomberg reported a 10-ton rise, the biggest one-day jump since Jan 15.
A second week of silver buying lifted the net to a four-week high of 35.9k lots, but still below the May high of 47.8k lots. The area-bound trading behavior of copper kept the price and the net long position unchanged. The latter due to an even inclusion of new long and short positions.
Broad gains in the grain market lifted the combined long position of the six most traded contracts to a six-month high of 560,000 lots. Buyers returned to soybeans after the net long position recently hit a 17-month low, the corn long position was the largest since May, while the KCB wheat long position was $ 60.6k raised their net long position by 16% to a five-year high of 55,000 lots. Cotton and sugar longs also rose, while short coverage helped cut cocoa net shorts in half.
For more on the reasons behind the current strength of wheat and coffee and agriculture in general, see the latest May update: Agriculture rally continues again, led by coffee, wheat and sugar