Article / 24 April 2017 at 8:08 GMT

COT: Gold longs exposed, oil bought ahead of slump — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
k Crops continue to be sold. Photo: Shutterstock

By Ole Hansen

Hedge funds maintained an overall unchanged commodity exposure in the week to April 18. The current theme of selling key crops continued with the sector net-short reaching the second highest on record. This selling however was offset by buying of energy and metals, especially WTI crude oil, natural gas and gold.

Speculative positioning in Commodities
WTI crude oil was bought for a third week just before being hit by renewed selling following the bearish US inventory last Wednesday. Changes in the short positioning has been a major driver during the past couple of months.

Following another reduction last week, it had deflated by 46% from the March 28 peak thereby leaving plenty of room for potential selling into the renewed price weakness seen towards the end of last week.

WTI Crude oil

Source: Bloomberg, Saxo Bank

The gold net-long hit the highest since the US presidential election last November. This as it challenged the multi-year downtrend from 2011 at $1,292/oz. During the past year this downtrend has been tested and rejected five times. 

The outcome of the French election Sunday has left many recently established longs out of money and this is now creating some short-term selling pressure. 

A weaker dollar, continued geopolitical concerns and an uncertain week ahead for the US (tax announcement?, debt ceiling and Trump's 100-day landmark) has so far helped offset some of this selling pressure. 

Comex gold future

Source: Bloomberg, Saxo Bank

Silver began to struggle last week amid a record fund long combined with the drag from industrial metals. The XAUXAG ratio hit a new high for the year on Friday, an indication that French election safe-haven demand has primarily benefited gold. The unwounding of this safe-haven bid has given silver a slight outperformance so far this morning. 

Speculative positioning in metals

Source: Bloomberg, Saxo Bank

The crop sector remains under pressure with selling seen across all the major futures. The combined net-short across the six US traded futures shown above rose to 420,000 lots last week, the second highest on record.

Speculative positioning in grains

Source: Bloomberg, Saxo Bank

Positioning in sugar and coffee is back to neutral while the net-short remains close to a record. 

 Source: Bloomberg, Saxo Bank

— Edited by Martin O'Rourke

Ole Hansen is Saxo Bank's head of commodities strategy
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Commitments of Traders: Commodities

Morris Morris
Ideally as the price of x goes down longs should be building positions and peak at the lowest point! This can be seen on WTI @ Nov 14 to May 15. Unless there is consistency to this how else can this info be useful?


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