Article / 27 June 2016 at 8:02 GMT

COT: Gold and silver net-longs hit record ahead of Brexit

Head of Commodity Strategy / Saxo Bank
  • Precious metals in heavy demand prior to UK vote
  • Commodities net-bought in week ended June 21
  • Overdue agri correction offset by energy/metals buying
By Ole Hansen

Hedge funds were small net-buyers of commodities during the week ending June 21. With two days to go before the Brexit vote the most noticeable development was the continued strong demand for precious metals. 

Speculative positioning in Commodities
The total net-long across 20 commodities hit a two-year high of 1.53 million lots of futures and options. Strong buying of energy and metals helped offset an overdue correction among agriculture commodities.

Speculative positioning in Commodities

  • Gold was surprisingly in demand despite the $50 selloff following the temporary suspension of campaigning in the UK. It left the net-long up 7% at a new record of 256,898 lots. With fundamentals increasingly providing support to gold, the elevated positioning remains one of the few obstacles in the short term.
  • Crude oil traders cut short positions and added new longs, leaving the net up 11%. This indicates that oil looks range-bound for now within a $45 to low $50s range.  
  • The already record net-long in sugar extended further leaving the sweetener exposed to a correction.
  • Corn was one of the hardest hit commodities last week, and as of last Tuesday it had triggered an 11% reduction in the net-long. This followed a 300% increase during the previous three weeks.

The dovish Federal Open Market Committee and the murder of a UK politician were two of the events that set the agenda for gold during the run up to the UK referendum last Thursday. Despite the $50 slump in response to the temporary suspension of campaigning, gold nevertheless continued to be bought, and by last Tuesday a new record long had been reached. 

Speculative positioning in COMEX Gold futures

– Edited by Clare MacCarthy

 Ole Hansen is head of commodity strategy at Saxo Bank. His Twitter account was cited by MarketWatch as one that investors should follow in 2016.

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Commitments of Traders: Commodity positioning by hedge funds


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