09 January 2012 at 10:12 GMT
Hedge funds and large investors as of last Tuesday increased their overall exposure to the 24 US traded commodities that we track by 20 percent to 888,000 contracts of futures and options. In nominal terms this was a 7 billion dollar increase on the previous week and the biggest weekly advance since July 2010. Six out of the 24 commodities have short speculative positions, a reduction of one from last week.
After the washout during December fresh money is now being put to work, not least helped by signs of accelerating US growth, geopolitical risk supporting oil and dry South American weather supporting grains. Dramatic gains were seen in grains and softs, both rising by more than 50 percent while smaller gains were seen in energy and metals and meats saw a small reduction.
The energy sector saw an increase across all four contracts with speculators continuing to pare back short positions in natural gas, despite the negative fundamental outlook. WTI crude oil interestingly enough saw only a small increase despite the strong price gains. This was very likely due to the rebalancing by index funds which commence Monday. This will see sizable selling of WTI crude in favor of Brent crude. Please
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The exposure to the agriculture sector, which comprises 15 different contracts, rose by one third as dramatic increases were seen in corn due to the South American drought, plus cotton, coffee and sugar ahead of rebalancing this week.
Investors continue to be hesitant about jumping back on the gold wagon with the speculative length unchanged from the previous week. Silver meanwhile has begun to recover from the depressed levels of previous weeks as speculators added 23 percent last week.
Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holding are typically institutional investors such as hedge funds and CTAs. Analysts and investors follow changes in these positions because such transactions can reflect an expectation of a change in prices.