11 July 2016 at 7:49 GMT
There was a big selloff of grain for a second week running. Photo: iStock
By Ole Hansen
Hedge funds were net-sellers of commodities for a second week with heavy selling of grains offsetting continuing demand for metals, both industrial through short covering and, not least, precious metals through the addition of new longs.
The combined net-long across the 22 commodities tracked in this dropped by 9% to a five-week low.
Hedge funds extended the record net-longs in gold and silver even further.
Total gold investment through ETF's and futures hit 2,811 tonnes last Tuesday, up 232 tonnes in last four weeks.
HG Copper turned net-long following three weeks of short-covering. Considering that this change was purely driven by short covering, the potential for further upside now remains limited unless fundamentals begin to improve.
WTI crude was sold for a second week with the net-long falling to a four-month low. The failure to break back above $50/barrel post Brexit, attracted renewed selling.
On the product side, meanwhile, we are seeing the continued divergence between an oversupplied gasoline market and stronger demand for diesel. Funds are holding a near record-low exposure to gasoline while the net-long in NY Harbor ultra low sulphur diesel has risen to a two-year high.
Three weeks of heavy corn selling has triggered a 60% reduction in the net-long.
— Edited by Martin O'Rourke
Ole Hansen is head of commodities strategy at Saxo Bank