Hedge funds building positions in gold and oil

According to the CFTC hedge funds and large investors last week added 6.2 billion dollars to their long exposure through futures and options across the 22 commodities that we track. The report was delayed by a day due to Veterans Day last Friaday. This brought their investments back up to the highest level in seven weeks as increased exposure was seen across all sectors apart from softs.

The big winner in the week was gold where investors through futures followed the recent trend from ETFs (see my update from Friday) where total investments have almost come back to the August high. Investors added nearly 4 billion dollars and took the total long exposure in lots back above 200,000 to the biggest exposure in seven weeks.

Investors in crude oil increased their long exposure by 2 billion dollars to 234k lots, the highest level since May. Long exposure to heating oil rose while gasoline was flat which is also reflected through the spread between the two called the “widowmaker”. It has risen to the highest level in three years reflecting the tightness in the distillates markets ahead of the winter season. Overall the energy sector was flat as the above mentioned increases were offset by natural gas where the now chronic short position continues to build.

Exposure to the grains sector rose by 11 percent on a combination of increased long exposure to corn and reduced short positions in wheat and soybean oil.

Investors continue to reduce exposure to Softs as the sector trades near the lowest levels this year. The biggest reduction hit sugar while investors took profit on short cocoa positions.

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.