04 July 2016 at 7:26 GMT
- Commodities sold during first week after Brexit vote
- Corn and wheat saw heavy long liquidation
- Gold and copper were in strong demand
By Ole Hansen
Hedge funds were net-sellers of commodities during the week ending June 28. Heavy long liquidation of corn and wheat together with major selling of WTI crude more than offset continued buying of metals, not least gold and copper.
Selling of grains and crude oil offset continued demand for metals:
Gold surged higher in the aftermath of the Brexit vote and despite the hiking of the futures margin by 22% last Monday and signs of profit taking the net-long still jumped by 6% to a new record of 273,000 lots.
Bullish silver bets also hit a new record high last Tuesday. This was just before the price surged 11% ahead of the weekend.
Platinum was net sold as the discount to gold hit a record $350. This relative cheapness together with the surge in silver helped attract buyers and by Friday the discount had narrowed to $282.
Crude oil initially sold of following Brexit and this helped trigger a 26% jump in gross short positions with the net-long falling to a 16-week low. Short-covering and not new buying were probably the main reason behind the subsequent rally back towards $50/b.
Corn was net-sold for a second week but remained elevated ahead of the June 30 acreage report which helped extend a two-day slump to 18%
Weather developments in Brazil together with the strengthening of the BRL to a one-year high helped drive the sugar net-long to a new record high while bullish coffee bets hit a 19-month high. Following the reduction in grain exposures last week the current sugar long now equates to one-third of the total agriculture fund position.
– Edited by Clare MacCarthy