Buying solid gold raises concerns in the short term
Saxo Bank publishes weekly trader engagement reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM and VIX currency futures, we use the larger measure called non-trading.
This summary highlights futures positions and changes made by hedge funds through merchandise, forex and financial until Tuesday, November 16. A week in which the market reacted to the shock of US inflation on November 11 by pushing the dollar up 2% to a new cycle high as 10-year equilibrium rates jumped 20 percentage points. base in a decade high. As bond market volatility surged, stocks held steady with the VIX posting a slight decline. The commodities sector was mixed with gains in precious metals and especially grains and commodities helping to offset weakness in the energy sector.
Hedge funds have increased their total exposure to commodities, measured in lots, on up to 24 major futures contracts since July. Driven by continued strong prices in the agricultural sector and, more recently, by precious metals in response to soaring inflation. These sectors saw all but one of the markets being bought while the energy sector was mixed with the continued selling of crude oil being only partially offset by the demand for gasoline and natural gas.
The four-week drop in crude oil resulted in the largest weekly reduction since July, and this time, unlike in recent weeks, it was WTI that led the reduction with a 10% drop to 307,000, at the with the exception of a deterioration in the short-term technical outlook also entailed. the prospect of a release of US stocks to curb domestic gasoline prices. Meanwhile, Brent has seen its long net fall to a one-year low at 221.5,000 lots, and over the past six weeks, net length has now fallen by a third, a reduction that is accelerating after the late October failure to break the 2018 high to $ 86.75, now a double high.
Crude Oil (OILUKJAN22 and OILUSDEC21) opened more slowly in Asia after Friday’s sharp drop, but has so far managed to find support at $ 77.85, the previous July high. In recent weeks, market attention has shifted from the current limited supply to the risk of a coordinated release of reserves, fears of a further Covid-induced demand slowdown and recent reports in the oil market. EIA and IEA pointing to a balanced market in early 2022. After falling around 10% from the recent peak, the market may have started to conclude that an SPR version was mostly integrated at the price.
Another week of solid gold buying has now sounded the alarm given the risk of a long sell-off if the yellow metal fails to hold its American CPI price increase above $ 1830. Last week, the long net on gold hit a 14-month high at 164,000 lots and the speed of accumulation, especially the 70% jump in the past two weeks alone, will raise a red flag for tactical trading strategies in search of a payday. on short positions, support should give way.
Gold extended Friday’s drop below $ 1,850 overnight, before rebounding past key support in the mentioned $ 1830- $ 35 area. The risk of a faster withdrawal of the Fed’s stimulus measures supporting real yields and the dollar has so far reduced gold’s ability to take advantage of the technical breakout. However, weak prices on Friday helped attract ETF buying, with Bloomberg reporting a 10-ton increase, the biggest one-day jump since January 15.
A second week of silver buying took the net to a four week high of 35.9,000 lots, but still below the May peak of 47.8,000 lots. The rangebound trading behavior of copper kept price and net long unchanged. The latter due to an equal-sized addition of new long and short positions.
Large gains in the grain market took the long combined of the six most traded contracts to a six-month high of 560,000 lots. Buyers returned to soybeans after the long net recently hit a 17-month low, long corn was the largest since May while long KCB wheat at 60.6,000 lots was the highest since August 2018. Supported by increasingly worrying supply prospects, coffee speculators lifted its net buy from 16% to a five-year high at 55,000 lots. Long positions in cotton and sugar also increased, while short hedges halved the short value of cocoa fillet.
More information on the reasons for the current strength of wheat and coffee, and agriculture in general, can be found in the recent May update: Agriculture rally led by coffee, wheat and sugar resumed.