Tariffs and trade war are the key factors afoot in world markets following last week's central bank-driven volatility. Emerging markets find themselves in the crosshairs with economies linked to Chinese exports hardest hit.
Article / 10 March 2014 at 8:56 GMT

COT: Safe-haven buying of gold proves non-existent as corn leaps

Head of Commodity Strategy / Saxo Bank

• WTI crude in strong demand
• Grain sector exposure jumps by 29 percent
• Corn rises to its highest net long since last March

By Ole Hansen

Hedge funds continued to increase their already multi-year high exposure to commodities during the week ending March 4. The total exposure covering 24 commodities rose for the eighth week in a row, this time by 7.3 percent to 1,999,000 contracts. Again, it was the agriculture sector seeing most of the buying, especially grains, with the net-long in corn jumping to its highest since last March. Net longs in WTI crude, gold, soybeans and coffee all rose to their highest in at least one year.

Speculative positioning in commodities

Hedge funds have almost non-stop been buyers of gold since late December and last week was no exception. The net long rose by 4,330 contracts to 118,241 which is the highest level since December 2012. However, once again, we are seeing most of the buying being driven by short covering. The gross long was actually reduced last week despite the heightened tensions in Ukraine and the much-talked about safe-haven buying based on these numbers seems to be non-existent. 

Gold speculative positioning

WTI crude was, once again, in strong demand during the week of March 4 as the crisis in Ukraine escalated. The net long rose to a new record at 346,469 contracts of futures and options, which correspond to more than 19 percent of the total open interest. Since then, the price at one stage retraced by more than USD 5 and this has left many recently established longs nursing losses and we should see the first weekly reduction in seven when data for the week of March 11 is released next Friday.

The grain sector exposure jumped by 29 percent last week, not least due to the continued strong buying of corn. In just five weeks, the net position has shifted from a net short of -52k to a net-long of 158k as the fundamental outlook for corn has improved significantly.

Corn speculative positioning

 The full report with charts is attached. 

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13 03 10_Commodity COT.pdf


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