Article / 03 November 2014 at 9:01 GMT

COT: Grain sector revival continues – net-longs in crude, gold cut

Head of Commodity Strategy / Saxo Bank
  • Exposure to grain jumps 57% amid short covering 
  • Energy sector still seeing heavy selling
  • Precious metals sales offset by copper purchases

By Ole Hansen

Hedge funds were net buyers of commodities for a third consecutive week and once again the increase was primarily driven by strong buying of grains. The energy sector remain on the receiving end of heavy selling while the metal sector was mixed with selling in precious metals being offset by buying of copper.

The total net-long rose by 2.1 percent to 666,000 contracts of futures and options. But with only ten out of fourteen contracts being net bought we see how the buying was concentrated around a few markets, most noticeable copper, the soybean complex and corn. 
Hedge Funds Sector positioning
The net-long in gold was reduced but primarily due to the short covering and this highlights how unprepared traders were when the price slumped to a multi-year low last Friday. 

The price recovery in copper that was driven by worries about supply disruptions from the world's third biggest mining area in Indonesia triggered a sharp reduction in net short positions back to almost neutral.

With cocoa production in West Africa not showing any signs of being impacted by the Ebola crisis in neighboring countries the price has slumped to an almost six month low. This has helped trigger an exodus out of long positions and as a result the net-long position dropped to a 16-month low last week. 

Speculative position in Commodities
Exposure to the grain sector jumped by 57 percent with short covering continuing to be the main driver behind the recent strong buying. 

Speculative Positions in US Crop Futures
– Edited by Clare MacCarthy

Ole Hansen is head of commodity strategy at Saxo Bank – the home of social trading

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