Article / 06 June 2016 at 9:00 GMT

COT: Gold longs cut by a third ahead of Friday spike

Head of Commodity Strategy / Saxo Bank
  • Bullish commodity bets up by 5% for week ending May 31
  • Net buying highest among grains as soybeans shoots to four-year high
  • Gold net longs cut by one third ahead of NFP report
  • Gold rose to above $1,240/oz in aftermath of dismal NFP

WTI settled into a tight range ahead of last Thursday's Opec meeting. Photo: iStock

By Ole Hansen

Funds increased bullish commodity bets by 5% to 1.17 million lots of futures and options during the week ending May 31. As the table below shows, the buying was concentrated among grains and the soy complex.

Corn net-longs doubled while soybeans it hit the highest in almost four years.

The energy sector was pretty quiet with WTI crude settling into a relative tight range ahead of the Opec meeting last Thursday. Most noticeable was the fact that both long and short positions were reduced ahead of this potential key risk event.

The counter seasonal reduction in distillate inventories during the past few weeks has driven bullish bets on Ny Harbour ULSD to the highest in almost two years.

Speculative positioning in Commodities
Relative small changes last week with the exception of corn where the net-long doubled. 

Speculative positioning in Commodities
Dollar strength and US rate hike speculation has seen the net-long in gold plummet by one-third during the past three weeks.

During this period, however, longer term and less tactical investors continued to accumulate gold through exchange-traded products.

Friday’s surprisingly weak US job report triggered a scramble to reinstate long positions and it helped gold settle above the key technical level at $1240/oz.

Speculative positioning in COMEX Gold futures
Continued strong demand for gold during May through exchange-traded products was not to off-set a one-third reduction from hedge funds.

The net-long in sugar reached a new record high with the short base continuing to be dwindle. Sugar rallied 7% last week to settle at the highest level since June 2014.

The rally has been driven by rain in Brazil which has slowed harvest and port loadings, thereby adding to global supply concerns. 

Speculative positioning in Sugar
— Edited by Martin O'Rourke

Ole Hansen is head of commodities strategy at Saxo Bank
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